Lotus Technology Inc. Warrants Q3 FY2024 earnings call

Management Statement and Operational Highlights:

• CFO Alexious Lee noted total revenue of $653M in the 9 months ending September, with over 7,600 vehicles delivered. ADAS revenue from external customers was $11M (+450% y/y). Gross margin was 9% in the 9 months (down from 11% last year) and 3% in Q3 due to inventory management. Service revenue margin was 55% in the 9 months (up from 28% same period last year).
• CEO Feng Qingfeng highlighted brand initiatives like opening a Beijing boutique and Chapman Bespoke service. Technology advancements include the 900-volt Hyper Hybrid EV tech, which offers over 1,000 km range, dual flash charging, etc. ADAS solutions have global coverage, with Lotus Robotics achieving $19M revenue (+217% y/y) and external customer revenue at $11M (+450% y/y). The Win26 strategy aims for operational cash and EBITDA positive in 2026, with 30,000+ deliveries and 20%+ gross margin.

Segment Performance:

• EVs: The luxury Eletre SUV and Emeya GT Sedan jointly contribute over 50% of total volume, with the Emira sportscar making up the remaining. In the first 9 months, Europe (inclusive of UK) contributed 35% to volume and revenue, with nearly 45% in Q3. China contributed 25% after 6 years of investment, and the US contributed 22% for heritage performance sportscars.
• ADAS Business: Revenue from customers other than Lotus was $11 million in the first 9 months of 2024, a year-over-year growth of 450%, contributing nearly 2% of total revenue. Total revenue for the 9 months ending September was $653 million with over 7,600 vehicles delivered. Third quarter revenue was $255 million with over 2,700 vehicles delivered. Gross margin for the first 9 months was 9% (down from 11% same period last year), and 3% in Q3 due to inventory management.

Guidance:

• Target 30,000 units sales volume by 2026, aiming for 20% gross profit margin. Plan to launch model year '26 products in March 2025. Monthly sales volume disclosures, with 2025 guidance to be rolled out by end of January/early February 2025. Focus on launching new models like the PHEV products globally in 2026 to boost sales.

Risks:

• Gross margin impact due to proactive inventory management related to trade protectionism, inflation, and macro uncertainties. Trade uncertainties affecting the U.S. market's ultra-luxury segment targeting.

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

A: NRE (non-recurring engineering) based on project milestones (kickoff to SOP), with full NRE received when vehicles are delivered to customers. Licensing revenue based on per vehicle. First vehicle (Lynk&Co Z10) launched with highway NOA, 4 more Lynk&Co models and 1 commercial vehicle to be equipped with ADAS solutions next year.

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

A: PHEV tech will cover all future models. Specific model launch details to be shared later; focus on being the first to launch this technology and luxury premium brand to do so.

Q: Margin decline in Q3 and trajectory?

A: Focus on destocking in Europe to improve gross margin before launching model year '26 products. Old model inventory can hinder new model sales, so precise cadence planning is key.

Q: Operating expense decline in Q4 and 2025?

A: Streamlining shops (small but effective), leveraging Geely resources (EV architecture), focusing R&D on high-margin tech (ADAS). Expected further expense decline in Q4 and 2025 through these measures.

Q: Full-year loss in 2024 and 2025 outlook?

A: 2024 guidance maintained. 2025 outlook is midpoint or below '24 guidance, with new model driving growth. Monthly sales volume disclosures help in finalizing 2025 guidance.

Q: Confidence in 12,000 annual sales target and Q1 2025 deliveries?

A: Confident in 12,000 target. Model year '26 products launching in Q1 2025 in China, driving sales. Delivery speed to be boosted in EU and new markets like Japan and South Korea.

Q: Luxury EV demand in China and sales strategies?

A: Lotus growing in China's $80k+ EV segment, with 40% market share in October 2024. Target to improve market share to 50%+ by end 2024, focusing on competitiveness in the ultra-luxury segment.

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

A: Constant investment in ADAS (intelligent chassis, smart cockpit, autonomous driving) as user data grows. No plan for capitalization yet; Lotus is a leader in intelligent solutions in the luxury premium segment globally.