Lotus Technology, Inc. Q3 FY2024 earnings call

Key Points

• Delivered more than 7,600 units of vehicles and $653 million revenue in 9 months; Q3 deliveries 2,744 units, revenue $255 million.
• ADAS business from non-Lotus customers had $11 million revenue in 9 months, up 450% y/y.
• Gross margin was 9% in 9 months and 3% in Q3 due to inventory management; expected to V-shape in Q4.
• Secured $130 million ADAS contract in 2024, part to convert to revenue in 2025.
• Operating expenses reduced for 4 consecutive quarters; Q3 operating loss $160 million, narrowed q/q and y/y.
• Lotus is fastest-growing British luxury heritage brand, deliveries ahead of competitors like Bentley, Rolls-Royce, etc.
• Implemented Win26 strategy to turn operational cash and EBITDA positive in 2026, target 30,000 units and 20% gross margin by 2026.

In the 9 months ending September, Lotus Technology delivered over 7,600 vehicles and achieved total revenue of $653 million. EVs, mainly the luxury Eletre SUV and partly the Emeya GT Sedan, jointly contributed over 50% of total volume. The Emira sportscar model contributed the remaining. Service revenue gross margin was 55% in the first 9 months vs 28% in the same period last year. The ADAS business from customers other than Lotus had revenue of $11 million in the first 9 months, up 450% year-over-year, contributing nearly 2% of total revenue.

Forward-Looking

• Aim for 30,000 units sales volume by 2026 driven by new models.
• Plan to launch model year '26 products in March 2025 and PHEV products globally in 2026.
• Expect gross margin to improve as inventory issues are addressed.
• Monthly disclosure of sales volume, with 2025 guidance likely in early 2025.

Risks

• Temporary gross margin impact due to inventory management.
• Trade uncertainties affecting the U.S. market.
• Dependence on new model launches and market acceptance.

Q: Color on cadence of $130M ADAS contract revenue generation and model launch?

A: Contract categorized by NRE (milestones) and licensing; first vehicle with ADAS is Lynk&Co Z10, highway NOA already equipped, urban NOA in beta testing.

Q: Hybrid product in 2026, new model or PHEV version?

A: PHEV technology for all future models, specific model details to be announced later.

Q: Margin decline in Q3, driver and trajectory?

A: Focus on destocking in Europe to return to healthy stock level, which will improve margin; old model inventory issues can impact new model sales.

Q: Operating expense decline in Q4 and 2025?

A: Streamlining shops, R&D focus on high-margin tech, leveraging Geely resources; expense decline continues with focus on tech and brand.

Q: Full-year 2024 loss and 2025 expectation?

A: 2024 guidance maintained, 2025 guidance likely in early 2025, midpoint or below midpoint of 2024.

Q: Delivery target 12,000 units, drivers for Q4 and 2025 first quarter?

A: Confident in 12,000 target, model year '26 products in Q1 2025 to drive sales; strong progress in China and UK.

Q: Luxury EV demand in China, sales decline reason and strategy?

A: Lotus growing in Chinese luxury EV segment (above $80k), target 50%+ market share; focus on competitiveness.

Q: R&D investment in Lotus Robotics and capitalization of ADAS?

A: Constant investment in ADAS, prioritizing intelligent chassis, smart cockpit, autonomous driving; no current plan for capitalization, ADAS as second revenue stream.