ECARX Holdings Inc. (ECX) Earnings Call Transcript & Summary

Good day, and thank you for joining us. Welcome to the ECARX First Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to your host for today's call, Rene Du, Head of Investor Relations at ECARX. Please proceed, Rene.

Thank you, operator. Good morning, and welcome to ECARX's first quarter 2025 earnings conference call. With me today from ECARX are our Chairman and Chief Executive Officer, Ziyu Shen; Chief Operating Officer, Peter Cirino; and Chief Financial Officer, Phil Zhou. Following their prepared remarks, they will all be available to answer your questions. Before we start, I would like to refer you to our forward-looking statements at the bottom of our earnings press release, which also applies to this call. Further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC. In addition, this call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the GAAP financial measures can also be found at the bottom of our earnings release. With that, I'd like to hand the call over to Ziyu. Please go ahead.

Thank you, Rene. Hello, everyone, and thank you for joining our earnings call today. The momentum we picked up in 2024 continued to build in the first quarter as the global automotive industry continues to evolve at a rapid pace. We remain firmly at the forefront of this transformation as we continue to strength and expand our portfolio of cutting-edge, cost-effective solutions and execute on our strategic vision. We hit a number of significant milestones during the quarter, which clearly reflect our position as a leading provider of intelligent solutions for automakers on a global scale. Global vehicle sales during the quarter fell 5.6% year-over-year, indicating growing market headwinds and supply chain challenges. Notably, however, the China market continued to demonstrate resilience, growing 12.9% year-over-year. And with this dynamic backdrop, we continue to capitalize on growing demand from global automakers seeking to stand out from competition and attract consumers with a unique driving experience. Our innovative product portfolio and strategic global partnerships offer them a unique value proposition, which continues to translate into an improving financial performance. Our operating loss narrowed further, growing 30% year-over-year to USD 24.6 million, while total revenue grew 30% to USD 168.5 million. Despite further competition, gross margins remained firm at around 20%, reflecting the continued progress we are making in optimizing product costs, executing our supply chain and manufacturing strategy, improving operational efficiency, and delivering value even in a highly challenging market environment. Shipments surged to 684,000 units, bringing the total number of vehicles on the road with ECARX technology to over 8.7 million by the end of March, an increase of 35.8% year-over-year and an 8.4% increase sequentially. Shipment growth was fueled by the remarkable success of Geely's Galaxy brand, which sold over 90,000 units in March alone, an increase of more than 290% year-over-year. We secured 8 new project wins under Geely's new foundation E/E architecture and supported the successful launch of Geely Galaxy E8 and Xingyao 8 during the quarter. Notably, both of these vehicles are the first to launch with Geely G-Pilot unified intelligent driving system, integrated with our Skyland Pro ADAS solution. Innovation remains the cornerstone of our strategy. In the first quarter, we achieved a significant milestone with the successful integration of the intelligent cockpit driving and parking capabilities into the Antora 1000 SPB. The latest and most cutting-edge interaction of the Antora series, E/E solution, which has already passed federal testing, represents a breakthrough in our R&D road map and enables us to deliver cost-effective, streamlined, and reliable solutions for entry-level vehicles. In March, we hosted our 2025 Investor Day in Hong Kong, where we highlighted our first quarter of EBITDA breakeven at the end of 2024. Our positive outlook for 2025 and our ongoing global expansion and technological innovation, the event was attended by over 80 investors and analysts, underscoring the growing interest in our story and our commitment to transparency. This was quickly followed by our first public offering since our listing in 2022, further diversifying our shareholder base. The USD 45 million in proceeds are marked to accelerate our global expansion by deploying global R&D and supply chain networks. With a strong start to 2025, a robust pipeline of new projects, a growing suite of innovative solutions, and a clear path to profitability, we are confident in our ability to capture opportunities ahead as the automotive industry continues its transformation. I will now pass the call over to Peter, who will go through the operating results of the quarter in more detail.

Thank you, Ziyu, and good day to everyone. I am pleased to report that we delivered another strong quarter of operational execution and continued global expansion, building on the momentum established in 2024. Our strategic initiatives continue to translate into robust growth, deeper customer relationships, and a rapidly expanding footprint, both in China and international markets. In the first quarter, we shipped 684,000 units. We now serve 18 OEMs across 28 brands globally, a testament to our growing scale and the trust global automakers place in us. A key highlight in the quarter was the successful delivery of our first digital cockpit sample to the Volkswagen Group. We achieved this milestone within weeks, demonstrating our ability to deliver high-quality customized solutions with speed and precision. This project is a significant step in our global expansion as it marks the first time our Antora 1000 computing platform and Cloudpeak software architecture will power vehicles in the Brazilian and Indian markets, highlighting our ability to customize solutions for both Chinese and international markets. We also secured 8 new project wins from Geely for their next-generation models under their new foundational E/E architecture. 6 of these will utilize our Venado computing platform, while the 2 remaining will be built on the Antora series. These wins further deepen our partnership with Geely and reinforce our position as a core technology provider for their future road map. Our technology continues to power some of the most exciting new launches in the market. During the quarter, Galaxy E8 launched with Skyland Pro 8 solution, integrating into the core of Geely's unified intelligent driving system, G-Pilot. The Galaxy Xingyao 8 PHEV Sedan was also recently launched and is the first Galaxy to integrate our full stack solution, including Antora 1000, Skyland Pro, and Cloudpeak, delivering a seamless intelligent cockpit and driving experience that sets a new benchmark for luxury safety and user-centric design. Our solutions are powering premium FAW models such as the Hongqi Tiangong 05 and 06, both equipped with tailor-made solutions that feature our Antora 1000 Pro platform, customized Hongqi FAW OS built on Cloudpeak framework and ECARX AutoGPT to be launched soon through OTA. An ADAS solution is also currently in development for 5 additional Hongqi vehicles with start of production anticipated for the third quarter. We expect similar solutions to be replicated and scaled across future Hongqi models, providing a cost-effective, streamlined solution that aligns seamlessly with the evolving E/E architecture. These launches highlight the flexibility and scalability of our product portfolio, which offers global automakers solutions that can be deployed across the entire vehicle spectrum from entry-level to premium models for both cockpit and ADAS applications. Our product portfolio has evolved to align with these flexible needs, with our intelligent cockpit solutions now focusing on our flagship Antora family, ranging from the single-chip Antora 1000 to the latest and most cutting-edge Antora FPB iteration. We also maintain a significant volume of Qualcomm-based solutions spanning from the basic 8155 to the E295 platform, with the E3 series planned for future deployment, designed for a centralized E/E architecture. For intelligent driving product lines, we successfully mass-produced our Skyland Pro solutions while maintaining flexibility to shift to more advanced solutions by leveraging NVIDIA platforms when customer requirements demand higher performance. This flexible approach ensures we can serve diverse market needs efficiently and effectively. The Volkswagen Group project was monumental for us in this regard, generating significant interest internationally for our flexible and scalable solutions regardless of the market. We are currently in discussions with multiple global automakers and have built a robust pipeline of RFQs as new business opportunities continue to come in from both China and the global market. This momentum is a direct result of our ability to deliver high-quality, cost-effective solutions at speed and our proven track record of successful global deployments. Innovation remains at the core of our strategy. During the quarter, we achieved a major milestone with the integration of intelligent cockpit, driving and parking capabilities into the Antora 1000 SPV. This solution has already passed road testing on the Galaxy E5, combines L2 ADAS cockpit and parking functionalities into a single cost-effective platform. Powered by the 7-nanometer SE1000 SoC, the platform delivers high-performance computing and AI capabilities, enabling automakers to accelerate the deployment of next-generation vehicles with enhanced safety and an improved user experience. We also recently introduced the ECARX experience, our advanced generative in-vehicle HMI system powered by our proprietary AutoGPT AI large model application. ECARX experience transforms the driving experience with a dynamic real-time interface that adapts to user needs, delivering smarter, safer, and more personalized interactions. To build up this momentum, we just showcased a demo of our cloud-integrated AutoGPT on the sidelines of the Shanghai Auto Show, further underscoring our leadership in AI-driven vehicle intelligence. A week ago, we announced a partnership with HERE Technologies to co-develop a next-generation AI-powered in-vehicle navigation system for global automakers. By integrating the HERE SDK and compliant global location data, this solution enables global automakers to significantly shorten development cycles and time to market for their vehicles while ensuring seamless compliance with international data regulations. Continued innovation strengthens our growing intellectual property portfolio, which has expanded to 705 registered patents and 770 patent pending applications globally as of March 31, 2025. As I have mentioned before, to support our global ambitions, we are building 2 closed-loop systems, one for China and the other for the overseas market. each spanning intellectual property, R&D, procurement, manufacturing and delivery. We're developing plans to set up a global supply chain center and international engineering center in Singapore, which will help us navigate the geopolitical landscape and better serve our international customers. We plan on having more than 100 employees there by the end of 2026. This will be directly supported by our Malaysian presence, which serves as our Southeast Asia product compliance and adaptation center, further strengthening our ability to localize and scale solutions for global markets. In summary, the first quarter of 2025 was marked by strong shipment growth, major project wins, successful product launches, and significant innovation milestones. Our expanding global footprint, robust pipeline, and relentless focus on operational excellence position us well to capture the opportunities ahead. We remain confident in our ability to deliver sustainable growth and value for our global customer base as we continue to execute on our strategy to drive the industry's transition to software-defined intelligent vehicles. With that, I will now turn the call over to Phil, who will review our financial results.

Thank you, Peter, and hello, everyone. We started the year strongly. The momentum we built during 2024 has continued to accelerate as we progress into the first quarter of 2025. Total revenue for the quarter landed at RMB 1.2 billion, an increase of 30% year-over-year. Sales of goods revenue was RMB 879 million, up 16% year-over-year as customer demand continued to grow for both computing platform products and SoC core modules. In Q1, our in-house developed platforms, Antora series, Makalu and Venado contributed approximately 39% to the total sales of goods revenue compared to 20% for the same period last year. This reinforced our in-house development strategy. Software license revenue came in at RMB 187 million, surging 148% year-over-year, supported by an increase in operating software license demand and a one-time software license authorization contract. Service revenue was RMB 157 million, up 49% year-over-year, primarily impacted by the design and development contract delivery, and the booking schedule, as well as overseas cloud and connectivity services business growth. Gross profit for the quarter was RMB 243 million, up 19% year-over-year, translating into a gross margin of 19.8%. Total cost of revenue increased 34% year-over-year, mainly driven by an increase in sales volume of automotive computing platform products as well as SoC core modules and software license revenue growth. Operating expenses during the quarter decreased 9% year-over-year, supported by continued improvement in global operating efficiencies and synergies achieved through R&D, resources reallocation, and integration. Adjusted EBITDA loss for the quarter was RMB 105 million, a significant improvement compared to a loss of RMB 224 million during the same period last year, which is primarily driven by the increase in gross profit, supported by an increase in software license revenue and service revenue growth. The reduction in total operating expenses, as well as a decrease in equity investment loss during the quarter, compared to the same period last year. Loss per share was RMB 0.57 for the quarter compared to RMB 0.85 for the same period last year. Moving on to our balance sheet. As of the end of the quarter, we had RMB 933 million of cash and restricted cash, together with the capital raise completed recently. We will have the required resources to accelerate global expansion and key initiatives road map while we continue to improve our working capital and profitability enhancement. In summary, our first quarter financial performance reflects the effectiveness of our portfolio management, disciplined cost and expense controls and the execution of our operational strategy. Looking forward, we will remain focused on expanding the customer base, improving our cost structure and driving operational efficiency to improve our financial performance and the sustainability of our business in the long run. That concludes our remarks today. I would now like to hand the call back to the operator to begin the Q&A session.

[Operator Instructions] Our first question comes from Danlin Ren with CICC.

I have 2 more questions for you. The first one, could you please give us a quick update on Skyland's recent orders and its profitability? And my second question is, has there been any additional pressure for annual cost down starting this year? And my third question is, have we been involved in the China Wuhan H3 program? And will H3 become JD's mainstream autonomous driving solution?

So this is Ziyu speaking, okay. Thanks for the questions. So the first one, yes, so Skyland [indiscernible] orders is quite good in quarter 1 because of the China market all in ADAS era. So also from the gross margin perspective, I think we are getting a very fair market gross margin is okay. And also, we have confidence to continue to keep the growth of the Skyland product line in Geely family and in industry as well. Also, you said -- also you already seen, we announced the partnership with the NVIDIA Thor platform with Zeekr, and we believe that will be an add-on volume very soon. In terms of the pressure of the pricing, I believe we are still very competitive in the China market because of the Antora platform and our very robust power line. So we already achieved the yearly cost down from OEM customers, and we are keeping working very closely this year to try to do better for each other. And the last one, so I cannot remember what the H3 waver, but I want to say we are a very close partner with Geely ADAS road map. Although you understand the [TCX] invest company actually just announced [indiscernible] SoC. Actually, that will be a very important platform as well as Antora, we will get investment. And also we were very close with Geely as well in the near future. Yes, that's all questions -- answer questions here.

Our next question comes from Bin Wang with Deutsche Bank.

Two questions. So my first question is regarding our SPV, centralized computing platform. Do you have any new business you can announce with any automakers?

Yes, of course. So as you know, we announced the partnership with Volkswagen Group. Also actually, we used Antora [indiscernible] and some of the brands are actually SPV panels, [indiscernible]. So that's very cost-competitive and very strong competition in the global market. Yes. Also in China, you're already seeing the good performance from Geely Galaxy E5 and ongoing Galaxy product line from Geely. I think that's already been a very important hero product and a hero part of the competition for Geely Galaxy already. Yes.

So does that mean that the Geely Galaxy product line will also, at some point, use some SPB products?

Yes. So actually, Galaxy E5 already has SPB platform already, including the gateway parking and the [ digital system ] together already. That's GA 3.0 architecture.

And my second question is, can you maybe comment a bit on the impact of U.S. tariffs, whether it's to our supply to Volvo vehicles or to our chip supply?

Okay. So the U.S. tariff challenge is very significant for the industry. But from ECARX point of view, we don't have in-house manufacturing. So we always contract manufacturing with partners for global delivery. So that's why, like the Volvo program also, we are very closely working together to find the right partner, we can easily land in Mexico, U.S., or Canada, that area, that region for manufacturing. I think that's very little impact for us.

Our next question comes from Catherine Sun with BOCI.

I have 2 questions about our global operation. And the first one is given the changing macro environment and the sluggish growth in the sales, how do you view the outlook for partnership with the international OEMs? And can you share our updates on your collaboration with Volkswagen? And are there any potential impacts from the 2? And my second question is that you just mentioned a plan to establish a supply chain and engineering center in Singapore. Could you share more on this? And how will it synergize with your existing supply chain network?

Okay. Catherine, thank you for the question. First of all, as we look at the market, we see a lot of interest from the global automakers. We had a number of very strong meetings around the Shanghai Auto Show as they visited China and saw many of the latest trends. And we continue to see that the China market is in terms of feature set, really leading the industry in the intelligent cockpit and intelligent driving areas where we are also engaged in that leading market and that the global automakers are definitely looking for strong partners that can bring great technology to them on a global scale. Specifically, you asked about the Volkswagen program. As we mentioned in our press release where we announced that program, that program will first launch in the Brazil market and eventually translate into the Indian market. We hope to expand to additional markets as well into the future, but those are the 2 launch markets, and we don't see a large impact from tariffs on those 2 supply chain structures. As you mentioned, we use contract manufacturing, and we've effectively set up great supply chains that are able to deliver to those 2 regions. Could you repeat your second question again? You broke up as you were going through that question. We want to make sure to answer all elements of it.

Okay, sure. And the third question is that you just mentioned establishing a supply chain and engineering center in Singapore. So could you elaborate more on it? And how will it synergize with your existing supply chain?

Yes, certainly. So as part of our strategy in -- throughout this year to serve the global market. We're establishing our global supply chain center out of Singapore, and then, as I mentioned in my remarks, between Singapore and Malaysia, we're building a deep engineering team that will help drive our global technology and fundamentally hold all of our IP for the international market. So that center will add to our existing footprint. It will give us a one global place to draw all of our supply chain activities from that can service the entire world from that location. And then it's very important to our long-term ability to serve the global markets with our technology stack as we'll move and maintain our software IP from that location, which allows us to effectively service both Europe and North America from that site with capable engineering staff. So we're quite excited to set that site up this year and continue to grow our capabilities there.

Our next question comes from Dash Shen with STDBI.

This is Tony from STDB International. I've got 2 questions here. The first question is related to the industry trend of integration of driving and cabin into one box. Since ECARX has both the cockpit and ADAS ability, how can we enjoy the trend in the near future? Maybe do we see any first product in this year or next year? This is my first question. And my second question is that we are glad to see that the Geely Galaxy demand is quite good, which helps to improve our earnings momentum. How do we see the sustainable demand into the following quarters? These are my 2 questions.

Thank you. This is Ziyu speaking. So, the first question, I would like to share with you. So our Antora platform, that's a very classic platform for integration of the cabin smart and ADAS feature together platform. So, because our SE1000 SoC from silicon engine, including [ 8 TAs ] AI processing inside. So that's why we already offer this platform to the market and many customers are very interested in or also already select this platform for the major of their product competition. So for example, like Galaxy E5 for your question, so we already deployed the digital cognitive features and also parking feature, and gateway feature to be robust already. So also, we are trying to promote the Font View ADAS feature in Antora and very soon. That's what I can share to you. Also, I just said at the beginning, so although we offer Antora 1000 platform to Volkswagen Group already, we announced this at February already. So that's why I believe that's also a very important platform to go the global market as well. Yes, that's the first answer to you.

And then Tony, maybe I'd add to Ziyu's comments. I mean, as you know, the Shanghai Auto Show is in progress, and we had a large number of meetings with many leading local automakers in China that are both looking to serve the China market and expand internationally, as well as many of our global partners. And probably every one of those meetings, we talked about this single box solution and our capabilities in that space. And in many of them, we showed up our prototype Galaxy E5, where we have the Level 2 functions deployed on that vehicle and operating, so we can take automakers on test and show how well that system runs and can navigate the streets of Shanghai. So it's a bright future for us in that space, and we feel very good about our technology and our capabilities.

Our next question comes from Derek Soderberg with Cantor Fitzgerald.

Just taking a step back, I might have missed it. Curious how many different car models you plan on equipping this year? And can you break down how many unique Geely car models you're going to ship into this year, and then how many non-Geely? Can you update us on that? And then, as my follow-up question, just another one on tariffs. Wondering if that's impacted the customer conversations, specifically with U.S. customers? And then from a timing perspective, when might we see ECARX as an option for the large U.S. automakers, when you guys see that sort of expansion into the U.S?

Derek, you're doing well today. Glad to have your question. Yes, I think maybe we didn't completely announce kind of our view for the whole year, but I would definitely say our launch pipeline is very robust. We certainly announced, I think it was about 8 wins in our earnings announcement, and went through wins with the Geely family groups, additional vehicles on Huni. Of course, we talked about the win with VW, though that will be a launch a few years from now, as it's in the international development pipeline that won't come out this year. But if we look across our pipeline of vehicles this year, our engineering team is very busy across a broad set of portfolio of projects that will drive a robust launch capability this year for sure. As we look at your second question was around tariffs. So, as you look at the tariffs, with the portfolio of our business today, we certainly don't see a significant impact in many of the tariff regimes, especially those coming out of the U.S. We have a flexible model in that we engage with contract manufacturers. So as we continue to have a dialogue with some of the North American OEMs, I think we'll make sure we adapt the final supply chains that support how these tariff structures will evolve over time here. And then lastly, looking at our business development pipelines, we're engaged already with a few opportunities in the U.S. market. I think you'll probably see us ramp that up as we get to the back end of this year and into next year in terms of engaging with those automakers. So we expect that would translate into revenue a few years later. But we're quite engaged with the European automakers right now, and we've got a very strong pipeline there. And then once we have, I think, continued to digest those opportunities, we'll pivot to the U.S. market, and we see a lot of opportunity in that space as well.

And I'm not showing any further questions at this time. I'd like to turn the call back over to ECARX management for any closing remarks.

Thank you. First of all, I just wanted to say thank you, everyone, for joining the call and the great questions. Again, as we said in our prepared remarks, as we look at our first quarter results, we had very strong shipments with over 650,000 units shipped in the quarter, and we continue to see that number of units grow quarter-by-quarter. We had major product wins with the Geely family, with additional automakers in China that continue to diversify our revenue stream there, as well as big milestones in the global marketplace. And we continue to expect that our progress there will accelerate. And then we had very solid financial performance, as you see in our first quarter results, with strong revenue growth as well as margin growth. And all of these are really supporting our long-term strategy and the ability to continue to develop ECARX into a significant global technology provider to the automotive space. So thank you, everyone.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.