ECARX Holdings Inc. Q3 FY2024 earnings call

• Market Update: Global automotive industry evolves towards software-defined vehicles; Chinese market picks up with EV sales growth.
• Customer Base: Diverse and stable, with new design wins from existing customers.
• Partnerships: Entered partnership with MulticoreWare, strengthened R&D with AI tools, invested in lower cost R&D centers.
• Product Launches: Geely Galaxy E5, Lynk & Co Z10, smart #5, Lynk & Co 02, and Pikes platform launched.
• Intellectual Property: 613 registered patents and 656 pending patent applications globally as of September 30.
• Manufacturing: Fuyang smart facility opened, with increasing in-house manufacturing control.

Total revenue for the third quarter was RMB1.4 billion, an increase of 31% year-over-year. Revenue from computing hardware was RMB1.2 billion, up 61% year-over-year, contributing approximately 23% and 11% to total revenue from Antora series and Makalu platform digital cockpits/autonomous driving controlling units respectively. Software license revenue was RMB84 million, down 39% year-over-year but up 49% quarter-over-quarter due to Flyme Auto sales volume and intellectual property growth. Service revenue decreased 26% year-over-year to RMB161 million. Gross profit was RMB248 million, with a gross margin of 17%.

• Revenue growth projected to continue with new vehicle launches.
• Focus on optimizing cost structure, expanding global footprint to mitigate geopolitical risks.
• Aim to improve margins through cost control and product portfolio optimization.
• Target to see profitability improvement and achieve breakeven in the short-term.

• Intense market competition leading to pricing pressure and margin decline.
• Geopolitical risks impacting global business expansion.
• Dependence on key customers and potential loss of design wins.

Q: Regarding the sale of goods margin decline, factors contributing and outlook for Q4 and next year?

A: Phil Zhou mentioned pricing pressure, product mix impact, and plan to rebalance services and software portfolio to restore margins.

Q: Does ECARX supply hardware for Geely's Star Wish?

A: Peter Cirino said Star Wish uses Venado platform.

Q: Outlook for Makalu platform in future vehicle models?

A: Peter Cirino said Makalu platform will be used in future vehicles for smart, Lynk & Co, and others.

Q: Gross margin outlook for 2025?

A: Phil Zhou aimed for over 20% gross margin, relying on services and software mix and cost optimization.

Q: Update on overseas expansion and overseas customers?

A: Peter Cirino talked about European OEM progress with RFQ processes and expected NRE service revenue by end of 2025.

Q: Percentage of revenue from Geely and future expectation?

A: Phil Zhou said 90% from Geely and ecosystem in 2024, aiming for 40% non-Geely by 2026-2027.

Q: ADAS chip breakeven and progress?

A: Ziyu Shen discussed AD1000 chip taping out at TSMC and plan to accelerate ADAS portfolio.

Q: Software growth opportunities?

A: Phil Zhou talked about Flyme Auto and Cloudpeak software growth replacing old generation and continuing momentum.