EHang Holdings Limited (EH) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang's Fourth Quarter and Fiscal Year of 2024 Earnings Conference Call. Please note that the management's prepared remarks and the subsequent Q&A session will primarily be conducted in Chinese and the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenient purpose only. In case of any discrepancy, the management statement in the original language will prevail. [Operator Instructions] And today's call is being recorded. Now, I will turn the call over to Anne Ji, EHang's Senior Director of Investor Relations. Ms. Anne, please proceed.

Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the fourth quarter and fiscal year of 2024. The earnings release is available on the company's IR website. Please note the conference call is being recorded and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman and the Chief Executive Officer; Mr. Zhao Wang, Chief Operating Officer; and Mr. Conor Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for the fourth quarter of 2024, unless stated otherwise. With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu.

[Interpreted] Hello, everyone, and thank you for joining our earnings call. Q4 and full year 2024 marked another record-breaking period for EHang. We continued to grow significantly, beating our guidance and setting new record high quarterly and annual deliveries and revenues. In Q4, we delivered 78 units of EH216 Series product, generating revenues of RMB 164 million, representing an increase of 239.1% year-over-year. For the full year, we delivered 216 units with a total revenue reaching RMB 456 million, marking a 288.5% year-over-year increase. More importantly, 2024 was a breakthrough year as we achieved positive adjusted net income and positive operating cash flow for the first year, a significant milestone in EHang's decade-long journey. With this, EHang also became the first eVTOL company in the global urban air mobility industry to achieve non-GAAP profitability, further solidifying our leadership. At China's 2025 Two Sessions, the low-altitude economy took center stage as strategic emerging industry and a key driver of new quality productivity. For the second consecutive year, it was included in the government work report, which explicitly calls for large-scale demonstration projects to advance new technologies, new products and new applications to promote the sector's safe and healthy development. Additionally, China's NDRC, National Development and Reform Commission, established a dedicated low-altitude economy development department in December 2024. Meanwhile, the local governments in over 50 cities across China have introduced their localized development plans for the sector. These government initiatives further highlight China's long-term national strategy and strong commitment to developing the low-altitude economy. If 2024 was the year of planning for low-altitude development, 2025 will be the year of its implementation. Since obtaining the 3 airworthiness certificates, we have been accelerating the commercial deliveries and operational deployment of the EH216-S. Our customers have already established over 20 eVTOL operational demonstration sites and e-ports across 16 cities in China, including Hefei, Guangzhou, Shenzhen, Shanghai, Wuxi, Taiyuan and Wenzhou. This year, our top priority is to launch operational demonstration projects in key cities to enable the public to experience the eVTOL flight firsthand. To this end, we have been actively driving the operator certification process for a pilotless passenger carrying eVTOL aircraft. Currently, the Civil Aviation Administration of China has completed document and on-site inspections for the first 2 applicants accepted. They are EHang General Aviation, our wholly owned subsidiary specializing in UAM operation services, and Heyi Aviation, our joint venture in Hefei. Both are now awaiting the final approval. We look forward to the early issuance of the 2 operator certificates, marking the beginning of the commercial eVTOL operation era. Looking ahead, we expect more operators to apply for the operator certificates, paving the way for broader commercial flight service of the EH216-S in the future. 2025 marks a pivotal year for AI technology innovation in China and globally. This year's government work report reaffirms the nation's commitment to the AI+ initiative, emphasizing the acceleration of AI applications across various industries, including the low-altitude economy. As the pioneer in pilotless eVTOL technology, EHang continues deepening our AI+ strategy. Leveraging our core technologies, including safety redundancy, autonomous flight and fleet management, along with intelligent system platform, we're integrating AI across the whole eVTOL life cycle to drive intelligent upgrades and innovative practices in commercial operations. This includes further optimizing our key technologies and capabilities such as intelligent flight control algorithms, autonomic detection, flight route planning, command and control, human machine interaction, scenario simulation and the UAV cloud system. Beyond enhancing our aircraft, AI is set to expedite the construction and enhancement of the digital infrastructure for air mobility. EHang will collaborate with multiple Chinese universities, colleges and relevant government departments and the commercial conglomerates to advance the inauguration and innovative integration of digital technologies such as 5G, 6G, satellite communication, sensor technologies and high-precision navigation with the low-altitude aviation industry. Together, we aim to build a smart low-altitude ecosystem, interconnecting air traffic infrastructure, flight corridors, communication and navigation systems, airspace management and operational services. This will establish a secure, efficient and intelligent digital foundation to support commercial operations for EHang and our customers. On the product front, we continue to advance our multi-rotor eVTOL series through strategic collaborations with the leading upstream companies, including INX, Greater Bay Technology, and Empower. Together, we are developing and customizing the next-generation high-energy solid-state lithium batteries, fast-charging batteries and electric motors. We have achieved great progress in simple design, prototyping and testing. We conducted the industry's first eVTOL test flight powered by solid-state lithium batteries, delivering an impressive endurance of over 48 minutes. We are thrilled about this major technological breakthrough that reinforces our confidence in next phase overall performance enhancements. For our upgraded lift and cruise model, VT-35, its prototype is in its final assembly and testing. We plan to complete the full functionality test flight as soon as possible and initiated the airworthiness certification process. It will be unveiled soon. For the flying car that targets the mass consumer market, we formed a cross-industry strategic partnership with China Automobile to actively design and discuss new product solutions to explore innovative approaches to future personal transportation. Over the past decade, EHang has pioneered numerous industry firsts, and we firmly believe the next 10 years will witness the rise of the low-altitude economy, disruptive development of AI technologies and transformative development in unmanned aviation. As the saying goes, a journey of thousand miles begins with the first step. As EHang enters its next decade in 2025, we remain steadfast in our commitment to advancing technological innovation, industry standards, operational demonstration and ecosystems development of pilotless eVTOLs. We aim to lead the transformation of urban air mobility while promoting the safe, healthy and sustainable development of the industry. Next, I'll turn the call over to our COO, Mr. Wang. Thank you.

[Interpreted] Hello, everyone. This is Wang Zhao. We closed 2024 with record high deliveries and revenues, exceeding our performance guidance. This success is driven by strong market demand and growing customer orders. In particular, our EH216-S autonomous passenger eVTOL has received a 30-unit order from Shandong Province, a 30-unit order from Zhejiang Province, along with an initial 5-unit order and an indicative order for another 45 units from Sunriver, with the result of 78 units deliveries in Q4 and RMB 164 million in revenues. The total annual deliveries reached 216 units with total revenues of RMB 456 million. To meet the continuously growing order demands, we are focusing on enhancing production efficiency, scaling production capability and planning capacity expansion. Guided by our manufacturer-to-order principle, we're establishing our regional and network production base layout in South China, East China and North China. In South China, our Phase 1 Yunfu production base currently has an annual capacity of 300 units. This year, we plan to expand Phase 2 with 24,000 square meters of new production lines while upgrading automation and efficiency. By 2025, Yunfu production base is expected to reach double size and a total annual capacity of 1,000 units. It will also produce a large number of aviation materials and components for our customers. In East China, with Hefei as our regional headquarters, we are further deepening strategic cooperation with Hefei government, partnering with the advanced new energy vehicle manufacturer, JAC Group and Hefei Guoxian Holdings to build an advanced generalized and automated eVTOL manufacturing base. Additionally, we are collaborating with the Weihai High-Tech Zone in Shandong Province to establish a pilotless passenger eVTOL R&D and manufacturing base there, creating an all-round collaboration system, integrated production, sales and operations. In North China, we have entered a partnership with the Beijing Fangshan District government to establish a national headquarters for low-altitude emergency rescue equipment. The headquarters features a 72,000 square meter factory, a training center of over 100,000 square meters and a training exercise base of hundreds of acres. Leveraging EHang's current flight platform and autonomous flying technologies, we plan to vigorously develop R&D production and operations in the fire emergency rescue sector, providing support for the life safety with autonomous flying vehicles. This year's Two Sessions promoted large-scale application demonstration actions and the safe and healthy development of the low-altitude economy, which are deeply in line with EHang's development strategy. We fully endorse this principle. Safety is the top priority of the sector. From the eVTOL design to the flight and operational system, EHang has implemented comprehensive safeguards for commercial operations. EHang has integrated the full redundancy philosophy from the IT sector into the design of our pilotless passenger eVTOLs and has passed vigorous airworthiness testing and certification. The 3 major electrical systems within the aircraft all have sufficient redundancy with backups, eliminating single point failures. As the low-altitude economy approaches a critical phase of mass adoption, the industry requires a suite of scientific comprehensive, rigorous and safety-oriented operational framework for eVTOLs. During the operator certification review process, EHang worked closely with government agencies, regulators, academic institutions and industry associations to advance the establishment and improvement of relevant standards and regulations. To strengthen safety operations, we have internally optimized our organizational structure to establish a comprehensive safety operational system and team. From product sales, customer service, personnel training, aviation material sales, maintenance and repair and software system to landing path design, route planning and integrated operational services, we are building a full cycle value chain encompassing hardware services and operations to provide customers with a one-stop solution. Looking ahead, our revenue streams will become more diversified. This year, EHang remains committed to the safety first principle while focusing on low-altitude tourism as the key entry points in urban air mobility as a large-scale goal to expand our UAM operational network in pioneer cities to demonstrate the low-altitude economy and then systematically scaling operations from point-to-point connections to a fully integrated network. For example, our second UAM hub at Luogang Park in Hefei, the eVTOL operations center at Longhua Airport in Shanghai's Xuhui River site and the first automated vertiport at the UAM center in Luohu, Shenzhen, these flagship projects serve as typical models. Over the next 3 years, we will work with partners such as China Construction Group, China Communications Construction Company and other infrastructure construction units, local governments and major commercial partners to jointly develop more than 100 urban air mobility terminals and more than 100 low-altitude cultural tourism terminals in national 5A-level scenic areas across China. We aim to build a city-level low-altitude economy flight service system and carry out integrated business cooperation that combines culture and tourism, transportation, emergency response and logistics. In 2025, based on EHang's current mature flight platform and autonomous flying technologies, we will not only vigorously develop passenger business, but also develop non-passenger business. The fire emergency rescue sector has already been established in the capital, Beijing. Besides, EHang is committed to developing low-energy, long endurance logistics UAV products, which will greatly promote the development of low-cost, high-efficiency aerial logistics transportation. We aim to realize applications in interprovincial, interprovincial and cross-border logistics scenarios. Currently, we have started exploration and layout in Beijing, Guangdong, Guangxi and Hainan. Overseas, we are expanding our presence in Asia, Europe and South America to continuously advance our market development flight scenarios and regulatory approvals. In Q4 last year, we conducted 3 consecutive days of EH216-S passenger carrying flights in Central Bangkok, Thailand, and plan to launch commercial trial operations this year within the sandbox areas designated by the Thai Civil Aviation Authority. In Japan, we completed a new 4 city flight tour, expanding our flight footprint across 16 cities and showcasing multiple use cases, including aerial site seeing, intra-island transportation, aerial logistics and emergency services. In February this year, EH216-S completed Europe's first autonomous eVTOL flight in an urban environment in Benidorm, Spain, setting a precedent for future urban air mobility deployment in Europe. Most recently, we conducted our first flight in Mexico, further expanding our global footprint to the 19th countries. To date, our cumulative flight record has surpassed 64,000 flights. As we move into 2025, we will continue to execute our global market strategy of deepening domestic business while expanding globally. We'll remain focused on both sales and operations, further diversifying our revenue streams. Amidst China's trillion-level low altitude economy and the Blue Ocean market, along with the great potentials for aerial sightseeing across nearly 15,000 Class A and above tourist attractions and nearly 700 cities for urban air mobility, we remain optimistic about the strong demand for our eVTOL product and operational services. Confident in our long-term growth prospects, we expect total revenue for 2025 to reach RMB 900 million, representing an approximately 97% increase year-over-year. Now, I'll turn the call over to our CFO, Conor, for the financial performance. Thank you.

[Interpreted] Hello, everyone. This is Conor. Before I go into details, please note that all numbers presented are in RMB, unless otherwise stated. Detailed analysis are contained in our earnings press release, which is available on our IR site. I will now highlight some of the key points here. I am pleased to report that we closed 2024 on a strong note, surpassing expectations for both Q4 and the full year. In Q4, we achieved record revenues of RMB 164.3 million, representing an impressive 190% year-over-year growth. For 2024, our total revenues reached an all-time high of RMB 456.2 million, up a substantial 289% year-over-year. This outstanding performance was primarily driven by strong eVTOL market demand along with our well-coordinated and impactful strategic initiatives in key areas, including OC certification, production scaling and commercial readiness. On deliveries, we set a new quarterly record with 78 units of the EH216-S delivered in Q4, marking a 239% year-over-year increase and a 24% sequential growth. For 2024, total deliveries of the EH216 Series reached 216 units, up 315% from 52 units in 2023. Our gross margin for Q4 was 60.7%, slightly down from 64.7% in the same period of 2023 and on par with Q3. For full year 2024, the annual gross margin was 61.4%, a slight decrease from 64.1% in 2023. The decreases in gross margin were primarily due to changes in the revenue mix and higher unit costs for the EH216-S. Despite these modest declines, our gross margin remained high at 60%, highlighting our competitive edge and pricing power in the eVTOL sector. Turning to the operating expenses. In Q4, adjusted operating expenses, which is defined as operating expenses excluding share-based compensation, were RMB 78.2 million, up 22% year-over-year from RMB 64.2 million, but down 10% from Q3. The sequential decline reflects cost control and efficiency optimization, while the year-over-year increase was mainly due to the expansion of sales channels, higher employee compensation and investments in new eVTOL models. In addition, we continue to actively invest in the development and iteration of new eVTOL models and technologies since we obtained the 3 airworthiness certificates. For 2024, adjusted operating expenses were RMB 290.1 million, up 28.2% from RMB 226.3 million in 2023. Strong top line growth and cost efficiency contributed to a solid improvement in non-GAAP profitability. Adjusted operating income for Q4 was RMB 27.9 million, a significant improvement from the adjusted operating loss of RMB 24.9 million in Q4 2023 and up 208.2% from Q3. In Q4, we realized the third consecutive quarter of adjusted net income for RMB 36.4 million, a sharp improvement from the adjusted net loss of RMB 22.1 million in Q4 2023 and up 132.3% from Q3. For 2024, we achieved the first ever annual adjusted net income of RMB 43.1 million, a significant improvement from the adjusted net loss of RMB 139 million in 2023, marking our entry into a new phase of sustainable and accelerating profitability. Alongside a strong revenue growth and improving profitability, we also maintained a solid liquidity position. As of the end of Q4, our total cash and cash equivalents, restricted short-term deposits and short-term investments was RMB 1.155 billion. This strong cash balance provides us with strategic flexibility to support growth initiatives, invest in innovation and enhance market competitiveness. Notably, we recorded our fifth consecutive quarter of positive operating cash flow and the first ever annual positive operating cash flow, amounting to approximately RMB 160 million in 2024, demonstrating our ability to generate sustainable cash flow while scaling operations. Looking ahead to 2025, we are in the final stretch of obtaining operator certificates. We believe that the achievement of this key milestone along with our active progress in eVTOL commercialization readiness, operational deployments, production scale-up, technological innovation and global market expansion will further solidify our industry leadership and lay a strong foundation for accelerated growth and drive us into a new growth cycle. Based on our current progress and market demand, we are expecting a total revenue in 2025 of approximately RMB 900 million, representing a year-over-year increase of 97%. Thank you.

[Operator Instructions] Your first question comes from Ting Song from Goldman Sachs.

[Interpreted] I just have a question, which is regarded on the production capacity. I know we are expanding our production capacity further into Phase 2. So wondering what kind of added production capacity we are looking at for the Hefei production facility by the end of 2025 and 2026? And also, if we are talking about a total production capacity of 1,000 units. So how much volume are we seeing? So how much will be the utilization rate are we looking at between 2025 and 2026?

[Interpreted] I'll take this question. For Yunfu Phase 2 for the capacity expansion, this will complete this year, reaching a total annual capacity of 1,000 units. And the Yunfu Phase 1 and Phase 2 production lines will have specialized focuses. They will be focusing on aviation materials/components manufacturing and aircraft assembly, respectively. So additionally, with our joint venture with Empower, we are also upgrading the production lines, improving the automation and efficiency in manufacturing and supply chain management. With regard to Hefei, we plan to establish a JV with JAC Motors and Hefei Guoxian Holdings to build a modern low-altitude aircraft manufacturing facility. And according to the planning of the government, of the Hefei local government, the expansion of construction work is expected to be completed in 1.5 and 2 years. And additionally, we also have plans for production in Weihai, Shandong Province and Fangshan District, Beijing, as previously mentioned. And our expansion for the capacity follows manufacturing to order principle. So we will adopt a systematic growth strategy across different parts of China, say, South, East and North China. And they will have a specialized management for different product lines, including passenger transport, logistics and emergency response and fire-fighting.

Your next question comes from Cindy Huang from Morgan Stanley.

[Interpreted] First, congratulations on the strong Q4 results. Could management provide additional color on the exact time line for our OC application? What are some of the milestones we are expecting with regard to the application? And my second question is that when are we going to achieve a GAAP profitability with our collaboration initiatives and also the construction of many of the infrastructure and facilities. Can you please offer a ballpark CapEx and OpEx for the coming quarters of this year?

[Interpreted] Let me take your first question. And we are glad to announce that we have -- so the CAAC has completed the acceptance and on-site inspection of these 2 AC applicants. That's for our Heyi subsidiary company. And we are now just waiting for -- so we have pretty much completed all the required work and just waiting for the final regulatory approval. So we also expect this OC will be rewarded to us as soon as possible. So the inspection and everything I mentioned itself is already a milestone. And these will provide the basis for us to roll into commercial operations as soon as possible. I want to emphasize that these will be the first unmanned eVTOL OC issued under the new interim regulations for the UAV flight management. So the certification process itself is establishing and also refining the standards. So it is a significant responsibility that will set crucial precedents for the safe commercial operation of EH216-S and all unmanned passenger carrying aircraft in China.

[Interpreted] This is Conor. I will take your second question. As we have mentioned, we have achieved non-GAAP profitability in 2024. And with your question of how and when are we going to achieve a full year GAAP profitability. So according to our plan and also our estimated revenue growth of 97%, which is RMB 900 million revenue in 2025, we expect to achieve GAAP profitability quarterly in the second half of 2024. However, for full year GAAP profitability, that will be sometime in 2026. So with regard to CapEx, our full year CapEx guidance for 2025 will be USD 40 million. And the CapEx will be used in scaling up our production capacity in Yunfu Phase 2, Weihai, Heyi, as well as our planned production site in Fangshan District, Beijing. And we will also use some of the money for developing models that will be used in emergency response and logistics, plus there's going to be investment in construction of our new headquarter in Beijing -- in Guangzhou. And we expect the OpEx to grow at 40% year-over-year in 2025.

Your next question comes from Wei Shen from UBS.

[Interpreted] Two questions, one is on the gross margin outlook and the other one is on financing plans in 2025.

[Interpreted] Our targeted gross margin is around 60%, give or take. So to achieve that, we are going to adopt 2 initiatives. For one, we are going to invest more efforts, roll out more product lines to make our product offering more diversified with the diversification that's going to help drive up the gross margin. And the second initiative we are planning to -- what I've just mentioned, that is going to help grow the gross margin. However, we are planning to do distribution model, which is going to sacrifice the gross margin a little bit. But give or take, we're aiming 60% gross margin. So last year, we used nearly USD 100 million. And also our current cash reserves exceeded RMB 1.1 billion. And as I've mentioned that our positive cash flow is around RMB 160 million for 2024. So as you can see that our business is self -- we have a business of self-sustaining capability and healthy development. So with regard to this year, we will accelerate market and business expansion, seeking additional financing to strengthen our capital position. This will support new eVTOL technology and product development, market expansion, new headquarters construction, production facility development and team growth. So ensuring sufficient funding for our next growth phase.

Your next question comes from Laura Li from Deutsche Bank.

Congrats on a strong year. So my first question is about the air taxi part. So we noticed there are increasing announcements of UAM, either you're building like an experience center or like development of digital infrastructure. So just wondering is there any rough time line for the air taxi operation and any notable milestones in between?

[Interpreted] This is Wang Zhao. I will take this question. While air taxi services remain our long-term vision and mission, aviation prioritizes safety above all, requiring careful step-by-step progress. So over the next couple of years, we will first establish operations in domestic tourism areas to accumulate enough data before we venture into air taxi services. And also air taxi implementation depends on ground infrastructure, particularly vertiports and many low-altitude digital infrastructures, including communication, navigation, surveillance, air traffic management. Right now, cities across China have put forward clear and specific plans and time lines for the infrastructure construction and with many planning hundreds to thousands of vertiports and routes over the next 3 years. As an industry pioneer, EHang is actively contributing to policy development and infrastructure planning. Our partnerships with CCCC and CSCEC and many local governments are actually helping to build the ecosystem and framework for air taxi operations.

Your next question comes from Rongyan Zhou from Citic.

[Interpreted] My questions are on your overseas market. The first one is the progress of our OC certification as well as the orders. What kind of situation are we at right now? And my second question is on our plans on diversifying our revenue streams. So with that -- I mean, particularly, what kind of revenue growth or mix are we looking at outside of manufacturing of these flying vehicles. So any guidance or plan on that?

[Interpreted] I'll take the question. Since Q4, we have completed flight demonstrations in Japan, Thailand, Spain, Mexico and many others, expanding our flight footprint to 19 countries. Last year, we delivered orders to overseas markets. That includes UAE, Japan and Dominica. As pioneers in pilotless passenger carrying aircraft, we are actively engaging with civil aviation authorities worldwide through local flight demonstrations and discussions to promote the airworthiness certification for this new aircraft. The CAAC is very supportive of our efforts in applying for international certification, and we are working together to promote the certification of unmanned passenger carrying aircraft overseas. We are actively exploring some innovative pilot-first approaches to expedite the international operations of our eVTOL. On your second question of diversifying our revenue streams, EHang maintains a dual strategy of both operations and sales. So we position ourselves beyond just being an eVTOL manufacturer. We build a complete life cycle value system for our customers, featuring hardware, service and operations. So this includes product sales, customer service, personnel training, aviation materials, maintenance, software systems and route planning and operations. As the eVTOL commercial operations scale up, EHang will develop more diversified revenue streams. And additionally, I want to tell you that beyond the passenger transportation, we are intensifying our efforts on logistics and fire-fighting business this year to broaden our revenue sources.

Your next question comes from Yiming Wang from China Renaissance.

[Interpreted] I got 2 questions. One is on the update on new orders and the second question is on the collaboration with the JAC production base. So what kind of roles will JAC and EHang play in this JV? And what kind of profit split and also cost split we are looking at between you 2?

[Interpreted] Our domestic demand is very strong with the current intention orders exceeding 1,000 units, plus many more orders are under negotiation. Just so you know that we have dozens of clients who place order of dozens of units at each time. And additionally, you should know that China has nearly 15,000 Grade A and above tourism attractions for aerial sightseeing. And there are nearly 700 cities that offer or planning air mobility services. So we remain optimistic about the strong demand for our eVTOL products and operational services. As with regard to your second question, the JV partnership with the JAC is actually carried out under the support -- with the support of the Hefei municipal government. And we are building a JV with JAC and Hefei Guoxian Holdings Corporation to build eVTOL production base. So JAC has accumulated expertise in manufacturing and supply chain management in automobile sector, whereas, for us, we are leading in the development, production and OC in eVTOL sector. So this cooperation will bring the best of us and leverage both parties' respective advantages. And with regard to the specific details of the JV, it's still under discussion. And I'm sorry, I couldn't disclose more at the moment.

Your next question comes from Xuxia Tang from Guosen Securities.

[Interpreted] Congratulate on the breakthroughs and the strong results achieved in 2024. I got a question on the financials, but I would like to double check with the management. So in Q4, we have seen that management and R&D-related expenses grew significantly quarter-over-quarter in Q4. So how does management view the trend for these expenses for 2025?

[Interpreted] You know that the company is still expanding. And that's -- while we are seeing substantial revenue and delivery growth over the past year, we're also expanding our team, leading to increased expenses. However, expenses as a percentage of revenue have decreased significantly. And looking into this year, we expect the sales and R&D expenses to grow definitely for sure, with a moderate growth in management expenses. So as revenue growth will outpace expense growth, we expect the ratio of SG&A to revenue to continue declining. As you know that we are projecting a 97% growth in our revenues, whereas our operation growth related costs will grow at 40% year-over-year.

Your next question comes from [ Ling Lu ] from Guosen Securities.

[Interpreted] Two questions, one is on the EH216 battery. So what's the progress on the next-generation lithium batteries? And what are the expected upgrades time line and the anticipated flight endurance improvements? How are that looking? Second question is on the product of VT-35. What's the update on that? And when are we planning to submit the TC application?

[Interpreted] With regard to battery, right now, we are pursuing 2 directions for the battery development. First, on the fast charging batteries -- fast charging. We are partnering with Greater Bay Technology and currently testing samples that could significantly reduce the charging time. So that's for one. And secondly, on the solid-state batteries, our strategic investment in INX Energy is progressing well. We are having very excellent cooperation and R&D breakthroughs. So we have doubled the EH216's flight endurance. And we'll continue fine-tuning the performance and conducting more scenario validation. So we are aiming for mass production and installation by the end of this year. With regard to the long-haul model, VT-35, right now, the development of prototype is currently in its final assembly and debugging stage. We plan to complete the full function flight testing soon and initiate the airworthiness certification project. It will be unveiled to the public shortly.

Seeing no more questions in the queue, let me turn the call back to Ms. Anne for closing remarks.

[Interpreted] Thank you, operator, and thank you all for participating on today's call. If you have further questions, please contact our IR team by e-mail or participate in the following investor events through the calendar information provided on our IR website. We appreciate your interest and look forward to our next earnings call. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]