Hesai Group Q2 FY2024 earnings call

• Market Trends: Hesai is a leader in the LiDAR market, with the automotive LiDAR market showing strong growth. The LiDAR adoption rate among EVs priced above RMB 150,000 in China surpassed 16% in 2024, and the company's LiDAR penetration rate in China reached 22% in June.
• Business Highlights: Collaborations with Baidu Apollo Go, where Baidu's Apollo Go launched operations in Wuhan with Hesai's AT128 ADAS LiDARs. Secured ADAS design wins with 19 OEMs globally across over 70 vehicle models, including 13 exclusive long-range LiDAR suppliers. Introduced the inaugural ESG report, outlining efforts in sustainable development.

In the second quarter of 2024, Hesai achieved quarterly revenue of RMB 458.9 million (USD 63.1 million), reaching the high end of guidance. LiDAR shipments rose to over 86,000 units, a 56% year-over-year and 46% quarter-over-quarter increase. The blended gross margin was robust at approximately 45%. The company's LiDAR market share highlights include being recognized as the number one automotive LiDAR company by market share for the third consecutive year, with a 37% global market share and 74% share of the global robotaxi LiDAR market in 2023.

• Q3 2024 revenue is expected to be between RMB 450 million (USD 61.9 million) and RMB 500 million (USD 68.8 million).
• Revised full-year 2024 revenue forecast is within RMB 2.0 billion to RMB 2.3 billion (USD 280 million to USD 320 million).
• Blended gross margin for Q3 and Q4 is expected to be close to 40%, up from earlier guidance of 30% to 35% for the full year.
• Anticipate approaching non-GAAP breakeven in the second half of 2024 and achieving profitability in Q4 2024.

• Downstream adjustments in the ADAS market due to postponed SOP timelines for certain client vehicle models.
• Unexpected production delays on the robotaxi side since late 2023, though financial strength remains robust.

Q: Please elaborate on the U.S. Defense Department's decision to remove Hesai from the backlist and its implications.

A: Hesai has maintained it was a mistake to be on the list, with no connection to military. Being removed could unlock more global deals.

Q: How does the business with robotaxi makers differ from traditional car makers in terms of value content?

A: Robotaxi makers buy in smaller volumes, so they pay higher prices with better margins initially, but long-term agreements will align prices with ADAS products.

Q: What factors contribute to the improvement in gross margin?

A: Cost management, economies of scale, and a one-off high-margin service revenue in Q2.

Q: When can we expect breakeven?

A: Anticipate non-GAAP breakeven in the second half of 2024 and profitability in Q4 2024.

Q: Differences between ATX and AT128?

A: ATX is a high value-to-cost, long-range ADAS LiDAR with performance upgrades and cost efficiencies, securing design wins with 7 OEMs, with SOP starting Q1 2025.