Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hesai Group (HSAI, Financial) achieved quarterly revenue of RMB458.9 million (USD63.1 million), reaching the high end of their guidance.
- LiDAR shipments rose to over 86,000 units, marking an increase of 66% year over year and 46% quarter over quarter.
- Blended gross margin was robust at approximately 45%, improving quarter over quarter due to effective cost management and additional service revenue.
- Hesai Group (HSAI) has been recognized as the number one automotive LiDAR company by market share for the third consecutive year.
- Secured design wins with 19 OEMs globally across over 70 vehicle models, including ADAS series production partnerships with 6 out of the top 10 global OEMs.
Negative Points
- Quarterly net loss narrowed but still significant at RMB72.1 million (USD9.9 million).
- Full-year revenue forecast revised down to a range of RMB2.0 billion to RMB2.3 billion due to downstream adjustments and postponed SOP timelines for certain client vehicle models.
- Less than 20% of total revenue is expected to come from the US market, indicating limited market penetration in the US.
- Despite strong performance, the company faces challenges from production delays in the robo-taxi sector since late 2023.
- Gross margin for the third and fourth quarters is expected to be lower than the second quarter due to the absence of one-off high-margin service revenue.
Q & A Highlights
Q: We noticed that the US Defense Department has decided to remove Hesai from the blacklist. Could you elaborate on the current developments and progress, and the implications for your project wins and overseas expansion?
A: We have consistently maintained that our inclusion on the 1260H list was a mistake. Our products are strictly for commercial and civilian use, with no connection to any military bodies. Being on the list impacted our reputation and business opportunities. If we are removed, we are optimistic about locking in more global deals. However, we need to wait for the official notice before commenting further.
Q: Can you provide more details on the market opportunity for robo-taxis, especially with Baidu Apollo's next-generation robo-taxi?
A: We are the biggest robo-taxi LiDAR supplier globally, with a 74% market share. Our AT128 sensor is being adopted by many, including Baidu Apollo. The biggest inflection point is more commercial than technological. We are receiving significantly larger LiDAR orders for robo-taxis, and international players are still focused on high-performance mechanical LiDARs, which is a higher-margin business for us.
Q: For the AT128 LiDAR sold to robo-taxi customers, is the pricing and margin the same as for EV OEMs?
A: The pricing for robo-taxi customers is higher due to lower volumes compared to EV OEMs. However, as volumes increase, the pricing will align with ADAS products. The margins are better for robo-taxi customers due to the higher price point.
Q: Can you explain the factors behind the significant improvement in gross margin in Q2, and the outlook for Q3 and Q4?
A: The improvement is due to cost management, economies of scale, and a one-off high-margin service fee. We initially guided a blended gross margin of 30-35% for the year but now expect it to be closer to 40% for Q3 and Q4. Effective expense controls and operational efficiencies are bringing us closer to profitability.
Q: How do you see the impact of Tesla's decision not to use LiDAR on the broader market?
A: Tesla's decision is specific to their Level 2 systems, which rely on human backup. For Level 3 systems, which require redundancy for functional safety, LiDAR is essential. Most global and Chinese OEMs agree on the need for LiDAR for Level 3 systems. The industry is moving towards higher safety standards, making LiDAR increasingly important.
Q: What is the shipment outlook for the second half of 2024, and how are client trends evolving?
A: We expect 300,000 to 350,000 shipments in the second half of the year due to downstream adjustments. However, we are seeing strong interest in our ATX product and a trend towards Level 3 standards among domestic OEMs. This is leading to a robust order pipeline for 2025 and 2026.
Q: What are the differences between ATX and AT128, and how do they impact gross margin?
A: ATX is a high value-to-cost low-range ADAS LiDAR with performance upgrades and cost efficiencies. It is expected to penetrate a broader range of vehicle pricing segments, driving scale and cost optimization. The gross margin for ATX will be reasonable, benefiting from economies of scale and integration improvements.
Q: Do you have specific products for the robotics industry, and what is the outlook for this sector?
A: We have products for the robotics industry, including ADAS sensors. We are seeing interest and orders from non-ADAS sectors and are aggregating them into the generic robotics sector. We see huge growth opportunities in logistics, mining trucks, last-mile delivery, and other robotics applications.
Q: What are the key scenarios where LiDAR is essential for Level 3 systems?
A: LiDAR is crucial for detecting general objects and in low-light conditions, such as at night or in tunnels. These scenarios pose challenges for computer vision systems, making LiDAR essential for functional safety in Level 3 systems. The industry is moving towards higher safety standards, further emphasizing the need for LiDAR.
Q: How do you achieve a lower cost for ATX, and what is the progress on integrating it with headlights?
A: The lower cost for ATX is achieved through economies of scale, integration improvements, and product definition optimization. We have partnered with Marelli to integrate ATX into headlights, and we expect large adoption starting in 2025, with even bigger volumes in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
