Hesai Group Q3 FY2024 earnings call

• Surpassed third-quarter revenue guidance with net revenue of RMB 539.4 million, maintaining strong growth trajectory with over 134,000 units shipped in the quarter, second consecutive quarter of nearly 50% growth. • Consistently reduced GAAP net loss for four consecutive quarters. • Projected fourth-quarter revenue of nearly USD 100 million and net profit of USD 20 million, aiming for full-year non-GAAP profitability in 2024. • ADAS clients: Largest ADAS client produced one-millionth vehicle in October; secured new platform wins with Zeep Motor and a leading EV manufacturer, with production starting in 2025; new collaboration with a leading EV manufacturer in China. • Global expansion: Worldwide shipping programs with a leading global automotive OEM advanced, signed collaborative framework with SAIC Volkswagen, secured development projects with a top three OEM in Japan. • OT128 launch: Unveiled latest flagship 360-degree mechanical automotive-grade long-range LiDAR, OT128, with production and delivery underway, secured contracts with over 90 global and domestic clients. • Emphasized LiDAR's role in safety, contrasting with vision-only systems, highlighting LiDAR's ability to generate its own light and offer real depth measurement.

In the third quarter, Hesai achieved net revenue of RMB 539.4 million (USD 76.9 million), surpassing the high end of revenue guidance. Shipments totaled over 134,000 units, marking the second consecutive quarter of nearly 50% growth. Blended gross margin was robust at approximately 47.7%. For the fourth quarter, LiDAR shipments are projected to reach 200,000 units, with net revenues expected to soar to nearly USD 100 million and an estimated net profit of USD 20 million. The company anticipates achieving full-year profitability on a non-GAAP basis for 2024.

• Fourth-quarter LiDAR shipments projected to reach 200,000 units, net revenues expected to be nearly USD 100 million with an estimated net profit of USD 20 million. • Anticipate achieving full-year profitability on a non-GAAP basis for 2024. • 2025: Expect to ship millions of units based on customers' forecasts, with three different modules of AT in production including ATP, ultra-high-performance AT, and cost-effective compact ATX, with ATX revenue contribution expected to increase relatively quickly.

• Dispute with the US DOD regarding the 1260H lawsuit: Removed from the list in October but relisted on a different basis; DOD's new rationale is considered faulty, with the company planning to challenge it in court.

Q: What's the latest development of the contention between Hesai and the US DOD? When do you expect the overhang could be fully removed? And are all projects scheduled for the 2025 launch in the United States still on track?

A: David Li stated the DOD removed Hesai from the 1260H list in October but relisted on a different basis. The new rationale is faulty, and the company will challenge it in court. Projects' statuses regarding 2025 US launches are being navigated through ongoing legal processes.

Q: Regarding 2025 volume, revenue, and margin guidance, and normalized LiDAR gross margin excluding NRE project impact in Q3?

A: David Li said 2025 will have significant design wins for new car models. Excluding NRE revenue, Q3 normalized gross margin is about 40% plus.

Q: About robotics, current LiDAR production for robotics customers and technology differences between robotics and ADAS areas?

A: David Li said industrial robotics applications are growing with secured orders, robotics LiDAR ASPs are higher due to lower volume, robotics focuses on wider FOV while ADAS needs miniaturized packaging and forward-looking, but shares fundamental capabilities.

Q: On OT128 first batch customers and partnership with Cruise?

A: OT128 has deals with over 90 clients, started production and deliveries. Regarding Cruise, it has resumed supervised autonomous driving tests, and Hesai recorded NRE revenues from L4 LiDAR for potential large-scale deployment.

Q: OpEx and margin guidance for Q4 and 2025?

A: Andrew Fan said full-year 2023 OpEx non-GAAP was about RMB 1 billion. For 2025, active expense management is committed. Q1 guidance is affected by seasonality, need to wait till end of year for clearer view.

Q: ATX design wins, pending ones, and potential client switch from AT to ATX?

A: David Li said ATX is more affordable, rational for clients to switch from AT if they can accommodate engineering changes. ATX is in the $200 range, while advanced AT products are more expensive for level three functions.