Hesai Group Price & Performance (HSAI)

Hello, everyone. Thank you for joining Hesai Group's fourth quarter and full year twenty twenty four earnings conference call. Our earnings release is now available on our IR website at investor.rosetta.com as well as via newswire services Today, you will hear from our CEO, Doctor. David Lee, 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 statements in our earnings press release which applies to this call as we'll make forward looking statements. [indiscernible] Also note that the company will discuss non GAAP measures today which are most thoroughly explained and reconciled to the most comparable GAAP measures in our earnings release and SEC filings. With that, I'm pleased to turn the call to our COO, Doctor. David Li, David, please go ahead. Thank you, Yuan Ting, and thank you everyone for joining our call today. Let's start with the look back at the exciting journey we've had throughout 2024. 2024 was a transformational and a breakout year for Hosea, with lighter 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. There is a rising tide of LiDAR storing demand and leveraging our unmatched vertical integration capabilities and economics of scale, we delivered the strongest financial performance in the global lighter industry with the highest net revenues and blended gross margin. Most notably, we've based history as the world's first LiDAR company to achieve full year non GAAP net profit while further strengthening our unmatched financial leadership with solid positive operating and net cash flows. Making us the only company of our kind the industry. Building on this momentum, we would love to share our three expected goals for 2025. First, we are projecting 1,200,000 to 1,500,000 LiDAR shipments with nearly 200,000 of those being high margin robotic LIDAR units. Second, we aim to achieve net revenues of 3,000,000,000 to RMB3.5 billion And third, we expect to achieve GAAP profitability of 200 to RMB $350,000,000. 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 [indiscernible] Critical areas where OEMs are fiercely racing to set themselves apart. According to Goldman Sachs, ADAS employs for explosive growth with market penetration expected to skyrocket from 8% in 2023 to a staggering 70% by 2030. In China. This trajectory mirrors adoption curves of smartphones from 02/2008 to 2015 and EVs from 2019 to 2026. Significantly 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, Chang'an and Leaf Motor are ramping up their strategic upgrades driving the push to make the intelligent driving mainstream. ADAS is more affordable and accessible than ever. Even more revolutionary is their universal intelligence driving strategy. Which integrates cutting edge ADAS across the new vehicle lineups also shattering price barrier. We line our equipped models now entering the 100,000 RMB range advanced driving technologies is within reach for a wider audience. [indiscernible] What's surreal to witness the democratization of intelligent driving technology and excited for what's ahead. As ADAS becomes ubiquitous, so does the demand for enhanced protection and safety driving the rapid rise of LiDAR adoption.

Filled 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 8% in 2023 to 20% in 2025 and then to an impressive 56% by 02/1930. According to Goldman Sachs estimates. The future of driving is here, as 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 more desirable than ever. First and foremost, lidars are becoming as essential as seatbelts, propeller lidars into the mainstream. Cabral and systems have been linked to crashes with dictionary emergency vehicles and unexpected road hazards as reported by The Wall Street Journal in 2024. In contrast, LiDAR outperformed cameras by cutting through glare and darkness while accuracy of detecting irregular small objects and other corner cases with unmatched three d 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 3,000,000,000 potential accidents including five sixteen severe accidents.

In the rate toward higher levels of tonnage driving, was 50% in Paramount LiDARs are just a nice to have. They are a game changer actively protecting you and your loved ones on the road. Second, lidars do more than just keeping you safe. They supercharge advanced driving features like urban NOA chassis turning, automated parking. In urban NOA, nearly 100% of the models use LIDAR for precise perception enabling smooth lane changes and optical avoidance in complex environment. [indiscernible] light our scans are rolled in real time detecting conditions up to 150 meters ahead including speed bumps, and potholes. It then adjusts the suspension for better efficiency and ride comfort. The automated parking LIDAR accurately maps the space and detects obstacles, offering robust performance in low light conditions and ensuring precise safe parking even in the tightest spots [indiscernible] 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. Why Chinese carmakers are positioning LIDARs in front [indiscernible] showcasing as a badge of innovation. A perfect example is [indiscernible] [indiscernible] one of China's largest shippers, which launched in August 2024 with our AT-one 28 LIDARs as standard.

The result sales explosion. By December 2024, monthly sales surpassed 8,000 units three times the sales of the previous model that didn't feature lighter. These core benefits are driving LiDAR into the spotlight, earning recognition from both OEMs and consumers alike. We are committed to lowering the barrier to LiDAR adoption and driving technological equality. ATS LiDAR, our category defining product, delivers unbeatable cost performance priced at just that $200 Equipping vehicle model starting as low as RMB100000 So it offers OEMs a budget friendly LiDAR solution designed to drive widespread adoption. With mass production kicking off in Q1 twenty twenty five, the ATX Radar 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 Sherry, which is one of China's top three automakers and a major automotive group that includes Voya, premium EV brand. Voya flagship electric MVV is a market powerhouse shifting over 10,000 units per month. Production for these filing wins take off in the second half of twenty twenty five and expect it to accelerate in 2026. In addition, our order book continues to diversify and expand as we forge new relationships and strengthening existing ones.

In February, BYD, the world's largest EV maker announced that its all its models will feature next generation ADAS, Godlight, making it accessible to everyone. LiDAR, will power two variants of this system which is key from urban to highway NOA. [indiscernible] We've deepened our collaboration with BYD and will supply LiDARs for more than 10 of its models. That's for batch production in 2025. But this is just the beginning. Our momentum is unstoppable. We've also secured exclusive ATI LiDAR design wins with Grace Wong Motors and Changan two of the top 10 Chinese automakers, covering multiple top performing brands, including bestsellers like Qiwen and Wei, slated for mass production in 2025. This marks a major leap for us accelerating by our 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 global stage. We are beyond excited to be awarded a new groundbreaking design win with a top European OEM further deepening our collaboration. This multiyear 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 vote of confidence in our visionary future. As we continue to push the boundaries innovation, our unwavering commitment to delivering unparalleled quality and exceptional products propels us towards an even more exciting future. Our momentum is 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 10 largest automakers market cap in China. It's just a win. That's a statement. A statement of industry leadership [indiscernible] and the sheer power of our cutting edge technology. In 2025, we demand Sergi, we're launching new production lines in Q1, which will begin production in Q3. By end of the year, our annualized production capacity is expected to reach 2,000,000 units. We are not just building Liar, 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're 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 hyperhelicpherical 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 we're 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 Mulva Robotics lawnmowers forecasting to deliver a six digit order in 2025. This order book is expected to grow as clients sense into new models launching in 2026 and beyond. Additionally, JT has also secured orders from Autonomy the autonomous agriculture 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? We're only beginning to unlock its full potential. Building on the strong momentum of our JD Series, we have also made significant strides in broader robotics applications. In Q4 twenty twenty four alone, beyond JT, we shipped approximately 7,000 robotic LIDAR units to L4 customers powering thousands of autonomous vehicles. Our robotic LIDAR is fueling the Robotaxy boom transforming industrial automation and pushing the boundaries of autonomy. We are the exclusive long range LiDAR suppliers for all of China's top five robot tech companies including Baidu's 1,000,000 autonomous miles in 2024, and is set for significant fleet expansion in 2025, all powered by our Pandora and QT series.

Beyond mobility, our XT series LiDAR is driving advanced three d vision for Unitree's robots and automating implant driving systems at the 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 [indiscernible] we know this is just the beginning of exhilarating journey. We are on a mission to redefine 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 of growth efficiency and sustainability. I will now turn the call over to Andrew to share more details on our financial performance and outlook. Andrew, please go ahead. 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 further details. Beginning with the numbers for the full year 2024, our net revenues increased to record high of RMB2 billion or US285 million the highest in the global industry.

Shipments in 2024 exceeded 500,000 units. More than doubling twenty twenty three'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 Southern per quarter or even per year. Of the 100,000 units shipped in December, [indiscernible] over 20,000 were delivered to our rapidly marking a significant leap forward for this booming market. In the fourth quarter twenty twenty four, 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 toward 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 $1,900,000 marking a significant leap from our non GAAP net loss of RMB241 million or $34,000,000 in 2023. At the same time, we further cemented our industry leading financial strength with full year positive operating cash flow of RMB63 million or US8.6 million dollars For Q twenty twenty four, was a standout quarter driving a strong inflow of operating cash flow at RMB641 million or US88 million dollars dollars These accomplishments not only validated our business model, but also solidified our leadership in the lighter 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 RMB 3,000,000,000 or US411 million to RMB3.5 billion or US480 million dollars representing a year over year increase of approximately 44% to 69%. This growth will be driven by total shipments projected to reach 1,200,000 to 1,500,000 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 the high six digits and the nearly 1,000,000 units to total shipments in 2025. We 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 driven by the newly launched JT series, our mini three d mechanical LiDAR now seeing strong adoption across AGVs, [indiscernible] stationary solutions and more. We are excited to have secured a major multiyear order for mobile robotic lawn mowers. 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 Lidas. Reinforcing its strong financial contributions.

Meanwhile, our Panda and XP 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 Panda series ranging from the low thousands to over RMB100000. We provide a versatile portfolio to meet diverse robotic needs Robotics LiDAR shipments are expected to reach nearly 200,000 units in 2025. Marking a major milestone in our robotics expansion. [indiscernible] Lastly, for the first quarter of twenty twenty five, we expect the net revenues to be between RMB $520,000,000 or US71 million dollars and RMB $540,000,000 or US74 million dollars 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 and 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 RMB 200,000,000 to RMB $350,000,000, with non GAAP profitability soaring to RMB350 million to RMB500 million.

And 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, are now ready to take questions.

For the benefit of all participants on today's call, For the sake of clarity, [indiscernible] Your first question today comes from Tim Hazle from MS. Please go ahead.

Hi. This is Tim from Morris Stanley.

Congratulations on the great results and thanks for taking the questions. So actually, I just have one question about the guidance. Because during the presentation just now, I think David and Drew share the robust revenue and bottom guidance for the full year 2025. Given similar moving factors, could you please share more detailed guidance about how like a quarterly volume trajectory would look like product mix of the ATX or the ATX-one-two two potentially impact for the ASP erosion as well as the gross margin trend. Throughout the whole year 2025. And I think Andrew mentioned gross profit margin was stayed at a healthy level. So what's the healthy level as you referred to is 40%? And in the meantime, we noticed that 2025 would be another profitable year [indiscernible] including first quarter in the low season, say profit making.

Yes, that's my question. Thank you. Thank you, Tim. Let me take this question.

Regarding our guidance for first quarter twenty twenty five, revenue wise, we expect to have a revenue between RMB $520,000,000 to RMB $540,000,000 a strong year over year increase of 45% to 50%. Mainly driven by the rapid adoption of Lidoc in passenger cars in China.

However, quarter over quarter growth was lower due to seasonal factors. Regarding volume and ASPs, we expect first quarter twenty twenty five 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 8128 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 accounts for roughly 60% to 65% in total revenues. Volume, we are expecting 1,200,000.0 to 1,500,000.0 total shipments in 2025. [indiscernible] based on our customer forecast. I. E. 1,000,000 to 1,300,000 units from ADAS and nearly 200,000 from robotics. For ADAS segments, we have discussed the multiple industry trends during our earnings call where LiDAR adoption 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 LeapMoto. 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. Heading into the mass market vehicles the ATX is projected to shift between high six digit to 1,000,000 units in 2025. Expect the long term content per week vehicle remains $500 to $1,000 with the introduction of L3 as more LiDAR units will be adopted per car for all around safety. Regarding our robotic segment, the robotics market is surging. Our JT [indiscernible] QT and Appanda series LiDARs ranging from low thousands to over RMB100000 are in high demand across consumer robotics, industrial automation [indiscernible] and various other robotics applications. For example, JT has already secured a market order from MOBA for robotic mowers. With projected 60 digit deliveries 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 production facilities in operation one in Shanghai and one in Guangzhou. Driven by the strong demand we are launching new production lines in Q1 which will begin production in Q3. By the end of twenty twenty five, our annualized production capacity is expected to reach 2,000,000 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 Robotics segment to contribute significantly to our margin profile. The 2025 blended gross profit margin is expected to be around 40%. [indiscernible] Net profit we are setting the pace projecting GAAP profitability to hit RMB200 to RMB $350,000,000 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.

Thank you so much for your detailed answers. That's super helpful. That's all from me. Thank you.

Thank you, Dean.

Thank you. Your next question comes from Tina Ho from Goldman Sachs. Please go ahead.

Hi, management. Congratulations on the strong results and strong guidance for 2025. I have two questions. The first one is in terms of the robotic robotic slider market, understand it's growing very fast and it's just an emerging market. So longer term, how should we think about the potential TAM and size of this market? Also longer term, do we expect the margin also to remain at such high levels? Or do we see the margin more normalized to the similar level as our ADAS LIDAR? When there is very 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 8,128. So just wondering going forward, how much more room for price for cost reduction there is? And then through what kind of technology advancement are we achieving these cost reductions? Thanks.

Okay. Thank you.

Let me first answer your question regarding the robotics market. Beyond ADAS, the robotic markets [indiscernible] The timing 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 twenty twenty four, we saw a surge in demand for robotic lawnmowers one of the emerging verticals and our lightouts are also driving advanced three d vision for Unitree's robots. In December alone, we shipped over 20,000 LiDAR units robotics applications.

Apple's recently unveiled a robot demo featuring 40 LiDAR sensors. Signaling that humanoid robots and similar technologies will see widespread light 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 LiDARs powers implants driving systems at the BMW's factory. As LiDAR technology continues to mature, we expect a more robotic verticals potentially dozens or even hundreds each will bring new growth opportunities to us. These non automotive sectors not only offers vast market potential, but also come with higher margins. With over a decade of LiDAR R and D and deep expertise, built from complex L4 applications we have established strong advantages in both product performance and batch control. And cost control. Additionally, we are integrating ASIC technologies into mechanical LIDARs further enhancing our technology and the cost leadership in this robotic segment. Take our newly launched JT product for example. We are excited to spot like the JT Mini LiDAR which debuted at CES twenty twenty five 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 [indiscernible] three sixty field of view. Giving robots unmatched spatial awareness to navigate complex environments and making it ideal for everything from humanoids 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 [indiscernible] and our partnership with MOBA for robotic lawnmowers expected to generate a six digit order next year. Regarding on pricing, the JT is priced as low to mid- southern Zhenminbi 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 will be similar, if not better than our other mechanical LiDAR products. That's the answer to your first question. [indiscernible] Andrew also hello, can you hear me?

Yes. Yes.

Hi, Tina. I also want to add to your question on the discussion of the gross margin between LIDARs for robotics versus LIDAR for ADAS. I think very interesting question. I want to answer that by giving you a few angles. The first one is that the nature for ADAS LIDAR, especially when we're talking about ATX for level two plus plus this type of applications. The nature is that it's a safety part. It's like an airbag or invisible seat belt, meaning that it's there, but the chance of you needing that is very, very rare. It's only in the one of the billions of the chance 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 closed to a very competitive price. But then the nature for robotics LIDAR is a different nature. It's not there to be the invisible airbag. Instead, it's the functional parts, meaning that it's taking a much bigger responsibility for that application. Which means that such a technology is creating 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 mower will get lost, which means that every every integrator of such a technology has the incentive to use the best ones, which can be translated directly to gross margin.

And the other reason is for commercial reason, True being told that in the ADAS market, it's still a reasonably concentrated market to the top three to five players. Well, if you look at robotics market, the nature is that we have a plastic form technology. We have a standardized product like JD but we never said JP was for lawnmowers. It was for really many things, for humanoid, for traffic monitoring, for forklift, for AGVs and for port and all and all, which means that each of the customer is really a tiny fraction. Of the entire customer base of such a product. Again in commercial logic it translates to higher margin because we're also a tiny part of their box. So with those two reasons combined, we actually firmly believe not only the robotic lidars are going to be a more diversified bigger market.

As well as we 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 in the longer term that this is going to be a high margin product and it will continue that way as we see in many other technologies that has very diversified customer base. I hope this helps the question of the first part.

Thanks Andrew David. That's very helpful.

Okay. Was that another question or Yes. The second one is regarding further cost reduction. Technology innovation cost reduction.

Sure, sure. So I think you're probably referring to the discussion between ATX and the Level three AT platform. So I think in the longer term, loans are actually very different trend. First, I guess, we should talk about ATX. Which is your main question. The short answer is that we don't see lot of room for this ATX platform to continue to even half of the current price because it's just not the nature of such a technology. First of all, we obviously factor in all the economies of scale when we design such a product because we know it has to reach the $200 level for this to be practical. And the AGX isn't really a [indiscernible] a price reduction version of AG-one 28. It's actually an entirely new product and it's a new design process with our fourth generation ASIC and with most advanced in house processes we have. And with a strong focus to reduce the size and the cost while still enhancing the core capability of such a such a product, and maintaining a reasonable gross margin. For such a product. And when we look at the longer term of such a invisible invisible airbag, invisible seat belt product, we feel like it's serving a very sweet spot.

And for the function it delivers. In other words, if we try to further reduce the cost, it's really cutting into a safety part that we don't want to. And for safety purposes, the highest priority is always the function and the reliability it delivers, which today we feel like it's at the right balance. And of course, when we plan ATX and it's already at the volume we believe it's right. At the airbag. So that's why we will continue to evolve technology to make it better and better, but we don't see this price point being further erosion. Having said that, I also wanted to point out that the Level three LIDARs are actually going to be in a different category, which is around $500 and up depending on the performance. The reason that the level three is paying for a much higher price is not only because of the design of the system, it's also because of the value proposition of such a product. So Level three product we're really looking at the value created by the vehicle that is much bigger than the level two plus plus which is some or urban NOA and the safety belt.

For level three, you're looking at a completely new function that most OEMs believe customers are willing to pay a significant additional money for And for that reason, they actually need the best level three LiDAR. Go with that function. That's why it's a much more expensive, much higher performance LiDAR. But still, with the fourth generation semiconductor platform, we also see great value proposition for such a product, but it will never go to the $2 level. It will stay at the $500 above depending on function.

Thanks David. That's very helpful. That's all my questions. All right. Thank you Tina for the great question.

Thank you. Your next question comes from Hesai Lowe from Bank of America Securities. Please go ahead.

Hi, David and Drew. Thank you for taking my question and congrats on the very brilliant result. Our number one question is, I want to ask one of the very frequent asked question is also something David just has commented. People think that the ASP decline would potentially improve in the next few years, potentially on the ADAS market. But as you mentioned, Level three is completely different. And then my be charging for a $500 kind of price for the OEM and consumers. So I guess that is that a question back to like letter change? Because currently the responsibility is still back the driver themselves. That say if they further open up such visibility, are we seeing like bigger potential in this market the longer term? That's my first question. Thank you.

Thank you. Let me try to make sure I understand your question. So your question is you want us to multiply the projected ASP times the volume and your worry is the ASP will continue to decline, right? First, I think the 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 the steady state price, which means that I don't believe this is further going down to a $100 level or below $500 level for the other LiDAR. So this is what we clearly see. That's the number one, right? Number two is the penetration rate. If you look at it, the the history of the penetration rates for the past two, three 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, [indiscernible] doubling more than doubling our volume for the past four or five years. And then for the entire market, it's also 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 if you're Level two plus plus which is really a safety belt.

So if you think about safety belt, in the end, our belief is that every car needs to have such a device. No matter which level you're talking about.

Yes, sure. Thank you so much. And then, one Yes, to add a little bit sorry, just to add a little bit on top of David's answers. So to summarize, regarding the historical decline of ASP, but our gross profit margin has remained stable and even improving Therefore, when we provided the guidance for 2025, both the revenue line and also the gross profit line. We have already factored in this decline of ASP. And under the current projection of the ASP trend, we're still confident that we can achieve a healthy growth profit margin of around 40%. Just this one minor point to add.

Yes.

I think, Andrew, made a great point that even though we repeated it over time, I still want to emphasize the fact that most of the fear in the past is that when we go down in ASP, are we able to continue to innovate on the ASICs and optimize the manufacturing and the supply chain to keep our gross margin steady. I think the answer is yes and we have done it especially considering that we don't believe the ASP will continue to go down So the certainty of the gross margin is very high. [indiscernible] Got it. Thank you so much.

Thank you. And my another question would be on the robotics site. So we have already quite successful with the Moa and autonomy. And then I think currently humanoid robot still yield the biggest excitement. So what other like kind of outlook we can be looking forward to on this robotic segment, especially the humanoid robots?

Sure. I'll quickly answer the question. So when we're talking about humanoid, we're really talking about different types. Of LiDAR. The first one is for humanoid to do localization, meaning you need to know where the humanoid way, the 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 type of lighter we do. For example, if you think about the hand, it needs to know what's grasping and it's a different type of three d sensor. It's technically still LiDAR, but it's a different type of LIDAR, the what we did producing. And we definitely see a lot of opportunity for humanoid to leverage the mechanical LiDAR solution we've developed But the truth is that I think it's humanoid robots are still also in its early phase. For the revolution on the design. 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 light ourselves, it's the core platform semiconductor we have. And this leadership will always be our biggest strength.

Got it. Thank you so much, David and Andrew. Thank you.

Thank you.

Any other questions?

That's all from me. Thank you.

You.

Thank you. Your next question comes from Jia Lu from BOICI.

Hello, management. Thank you for taking my question.

ADAS LIDAR adoption pace in overseas market. Actually, glad to see that we got a exclusive design win with the top European OEMs recently. But since electrification in European market seems slower than expected, And we know that Laidah adoption is closely related to smart EV popularity. So how do we how do we expect our LIDAR ADAS LIDAR growth prospects in overseas markets? In coming years?

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 the ICE and EV, which means really all the 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 economies we work with and it's 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. And this is really the trend we see. We shouldn't be [indiscernible] limited by the concepts of EV when we think about LiDAR. LiDAR is really for all the new vehicles who want to have the future of the invisible airbags. And the seat belts. So that's why we're limited by that. And we the other great thing is that the other global program we already have, they will start shipping by end of this year and it will start to be again a global program inside and outside China.

Got it. And any quantitative guidance for our overseas lighter shipments?

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

Got it. So this OEMs shipment will start next year?

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

Okay, got it. And my second question is regarding the long term competitive landscape of edas lighter market. Since now we are [indiscernible] supplier for our key clients such as Li Auto, Xiaomi, And is there any possibility possibility that along with their LiDAR shipment surge, this key OEMs will find another supplier for LiDAR. Or they will rely us as the only lighter [indiscernible] So in other words, how should we expect our market share in ADASLIDER market upside.

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 relationship and we're designing in the switch cost high, More importantly is the competitiveness, right? In different countries, this competitiveness is defined differently. For our global customers, it's the performance leadership. They always wanted the best quality, best performance, and that's why they pick us exclusively. In China, honestly, it's price. You need to be very price competitive as 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 that we have a pretty good leadership, which means that as long as we keep our costs out, as long we keep innovating on the semiconductor we will always have a sizable gap than our peers it's really difficult for customers to pick somebody who is more expensive and inferior somebody they never worked with.

You probably shouldn't do that. So that's how we try to maintain our leadership.

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

Thank you. Thank you. Your next question comes from Yu Zheng from Huitei Securities. Please go ahead.

Hello, management. Thanks for taking my question. My first question is about the guidance. We see that we see a very strong guidance from the company with the shipment increase over over $1,200,000 and the profits reaching RMB202 RMB $350,000,000 in the GAAP How to achieve the above guidance?

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 has already provided. And the reason why this volume growth is quite strong is because our top customers including Li Auto, Xiaomi, [indiscernible] increased their sales target and also the LiDAR adoption rate. Year 2025. Some car modules have been selling LiDAR as standard configuration. That's how we got our revenue guidance. And with the 40% gross margin assumed. We are going to have about additional we are going to have generated an additional of RMB400 million to RMB600 million in gross profit. That's the improvement to net profit at GP level. Regarding the expenses management, in year 2025, we are committed to elevating expenses management to new heights. Ensuring enhanced efficiency and financial discipline We expect that our total OpEx to be slightly lower than year 2025.

If you look at our financial statements in 2024, our total OpEx is close to RMB1.4 billion. In year 2024. We expect that this number in year 2025 will be lower. So if you take these two factors, together, it is not so difficult to to get to the bottom line level number. Which is a GAAP net profit of about 200 to RMB $350,000,000 and a non GAAP net profit about RMB350. Million to RMB500 million. That's my answer to your questions regarding net profit guidance.

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

Yes, I'll take this question. So I understand your logic but let me give you a counter example. The easiest example to counter your argument is the robotic vacuum cleaner. Right? You would think that is so slow and so cheap and really doesn't kill people when they bump into things and yet every new robotic vacuum cleaner has a lighter. Of course, it's not a lighter from us, it's a much cheaper one. But if you think about why would they do that? The answer is very simple. It has certain functions. You need to do SLAM, meaning that you need create a map, you need to know where that is. And yet if you use cameras to do that, it's not a great product. So they need a very good LIDAR to do that. Of course, that function needs to the price needs to match that function. Similarly, with humanoids, the robot, it still needs to map what's around you. And even though you think it's slow, it's still very costly when you trip on something or you bump into something or miss grabbing an egg or a bottle or something. So in the end, it's not about two d versus three d, it's about how much it costs on three d versus whether I need this three d to create valuable function for me.

Again, whatever you think about, think about the robot vacuum cleaner. Okay?

Okay. Thanks. That's very helpful. And that's all my questions. Thanks. Thank you. Your next question comes from Sia Huang from S. SP SBI. Please go ahead. Hi, management team. Thanks for taking my question. This is Sia from SBBI. I've just got one question on our capacity and CapEx plan. Since demand seems strong in both auto and the robotic sector, sectors. And as you mentioned, we are now launching new product lines. So my question is, we have an updated CapEx plan in 2025 and 2026.

Sure. I'll take this question. So with this strong demand, our CapEx in year 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 twenty twenty five our annualized production capacity is expected to reach about 2,000,000 units. We believe that this production capacity can satisfy our demand in this year. Meanwhile, as our collaboration with global carmakers deepens. For example, our exclusive contract with the top European OEM has David just mentioned. 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 the target.

Furthermore, our highly automated production technology enables us to set up an overseas production line with well managed with CapEx numbers and relatively short time period. Hence, we expect twenty twenty five full year CapEx should be around $30,000,000 to $50,000,000 in total. And we have sufficient financial resources to support this CapEx. [indiscernible] Thank you, Sia.

Thank you.

Thank you. Unfortunately, that does conclude our time for questions. I'll now hand back to the company for any 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 this 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