Hesai Group HSAI Q1 2025 Earnings Call Transcript

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DATE

• Monday, May 26, 2025, at 9 p.m. EDT

CALL PARTICIPANTS

• Chief Executive Officer — David Li
• Chief Financial Officer — Andrew Fan

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TAKEAWAYS

• Revenue: Total revenue reached RMB 525.3 million ($752.4 million) for Q1 2025, representing a 46% year-over-year increase, largely driven by surging LiDAR unit shipments.
• Unit Shipments: Nearly 200,000 LiDAR units shipped in Q1 2025, more than tripling year over year and marking the third consecutive quarter of over 150% year-over-year shipment growth.
• Gross Margin: Gross margin was 42% for Q1 2025, described by management as "healthy" in the call.
• Operating Expenses: Q1 operating expenses decreased by 9% year over year, underscoring improved cost control.
• Net Loss Reduction: Net loss (GAAP) narrowed 84% year over year to RMB 70.5 million ($2.4 million) for Q1 2025, with management confirming non-GAAP profitability.
• Product Mix and Pricing: The ATX LiDAR, priced at $200 per unit, entered mass production in Q1 2025 and is projected to contribute 50%-60% of total deliveries in Q2 2025.
• Full-Year Guidance: Management maintained full-year revenue guidance at RMB 3 billion to 3.5 billion for 2025, with shipments of 1.2 million to 1.5 million units and a gross margin target around 40%.
• Q2 Outlook: Q2 2025 revenue is guided to RMB 680 million ($93.7 million) to RMB 720 million ($99.2 million), up 48%-57% year over year, with shipments expected to exceed 300,000 units (approximately 250% year-over-year growth).
• Profitability Outlook: Management expects to reach GAAP breakeven in Q2 2025 and reconfirmed a full-year GAAP net profit target between RMB 200 million and RMB 350 million.
• Production Capacity Expansion: Domestic production is on track to reach 2 million units of annual capacity by year-end 2025, with new lines to begin mass production in Q3.
• International Manufacturing: A new Southeast Asia factory lease was signed in May, targeting operation by late 2026 or early 2027 for overseas customers.
• Tariff Exposure: U.S. revenue is projected at 10% of total for 2025, with only 5% of total revenue (or half of U.S. revenue) under delivered duty paid (DDP) terms, limiting direct tariff impact.
• Design Wins and Customer Base: There were design wins for over 120 vehicle models across 23 OEMs in Q1 2025, including new integrations with Li Auto, Zeekr, Leap Motor, NIO, Chery iCar, Ora, and multiple robotics companies.
• Robotics Segment Growth: Robotics LiDAR shipments hit nearly 50,000 units in Q1 2025, up over 600% year over year, with a 12-month contract to provide 300,000 JT units to a smart home robotic customer.
• Industry Recognition: According to Yole Intelligence's 2024 analysis, Hesai holds 33% of the global automotive, 26% of the global passenger-car, and 61% of the global robo-taxi LiDAR market share by revenue.
• Legal Resolution: The U.S. District Court for Delaware dismissed Ouster's patent lawsuit against Hesai with no conditions, settlement, or injunctive relief; management cited this as a full resolution of pending IP litigation.
• R&D and Cost Structure: R&D accounted for 65% of non-GAAP OpEx in 2024; management guided a RMB 100 million reduction in GAAP OpEx and stressed stability in R&D spend as business scales.
• Average Selling Price (ASP) Trends: The blended ASP declined due to ATX ramp, but ATP will finish production by year-end, while high-performance units (AT, ETX, AT1440) remain at $500+ per unit, as stated by management and are set to scale from 2026.
• Infinity I Platform Launch: Three new Infinity I LiDAR configurations (IA/IB/IC) for L2-L4 autonomy launched in April, touting platform architecture with over 85% parts commonality, and all three have secured series production design wins.
• Capital Expenditure Guidance: Total CapEx for 2025 is projected at $30-$50 million.

SUMMARY

Hesai Group (HSAI -1.79%) delivered rapid revenue and shipment growth in Q1 2025, achieving sharp margin improvements and maintaining full-year financial guidance despite ongoing tariff and market uncertainties. Management addressed growing international momentum with new OEM and robotics partnerships, confirmed the company's robust position in the automotive LiDAR supply chain, and highlighted a favorable legal outcome in the U.S. IP dispute. Significant advances in product diversification, production scalability, and multinational operational expansion were emphasized as key drivers of sustained competitiveness.

• Chief Financial Officer Andrew Fan said, "We expect to reach GAAP breakeven in Q2 2025, remaining firmly on track to hit our full-year profitability targets."
• The factory lease commitment in Southeast Asia marks a strategic geographic diversification to mitigate geopolitical and tariff exposure.
• Chief Executive Officer David Li noted, "In early May, the US District Court for the District of Delaware has officially dismissed Ouster's patent infringement case against us, with no conditions, no financial settlement, and no injunctive relief."
• The new Infinity I platform targets full-stack L2-L4 autonomy, signaling intent to secure orders from premium and mass-market segments globally.
• Management identified accelerated ADAS LiDAR adoption, particularly in China, and projected a dramatic increase in ATX shipment volumes for 2025.

INDUSTRY GLOSSARY

• ADAS: Advanced Driver Assistance Systems; automotive technologies enhancing driver and vehicle safety, often a precursor to full vehicle autonomy.
• LiDAR: Light Detection and Ranging; a sensing technology using laser pulses to measure distances and create high-resolution 3D maps, critical for autonomous vehicles and robotics.
• DDP (Delivered Duty Paid): An international trade term where the seller is responsible for all costs, including duties and tariffs, until goods reach the buyer.
• Design Win: The formal selection of a supplier's component or product for integration into an OEM's production model, usually leading to series production orders.
• POC (Proof of Concept): A preliminary project with an OEM or supplier to validate technology integration, preceding a potential design win.

Full Conference Call Transcript

David Li: Thank you, Yuanting, and thank you everyone for joining our call today. Let's start with an overview of this quarter's progress. We began with a small start in 2025 fueled by outstanding momentum in our ADAS and robotics segment, and backed by solid financial results. Our shipments more than tripled year over year to nearly 200,000 LiDAR units in the first quarter despite the impact of typical seasonal patterns. This explosive growth suited an almost 50% year-over-year jump in our net revenue. Thanks to sharp execution, operational discipline, and cost control, we are also able to reduce our net loss by an impressive 84% year over year. Meanwhile, Hesai's leadership is being recognized across the industry.

For the fourth consecutive year, Yole Intelligence, a highly respected independent research firm in Europe, ranked Hesai as the number one global leader in automotive LiDAR market share. According to Yole's 2024 analysis, we ranked number one in three major categories, like revenue with a 33% share of the global automotive LiDAR market, a 26% share of the global passenger car LiDAR market, and a dominant 61% share of the global robo-taxi market. These achievements speak volumes at the pace at which we innovate, scale, deliver, and reinforce our position at the forefront of the industry. Next, let's dive into our latest business highlights, starting with accelerating momentum in the ADAS market.

The 2025 Shanghai Auto Show, one of the world's largest and most influential auto events, featured over 100 vehicle models with cutting-edge LiDAR technology. Hesai stood out with 12 OEMs at the show using our LiDAR technology, and among the 2025 production models making their debut, Hesai had the highest number of model integrations. The event shows that automakers are rapidly implementing intelligent driving across their lineups and that LiDAR is fast becoming a must-have for elevating safety in everyday passenger cars. Our ATX LiDAR is the embodiment of our core belief: safety is not optional, never second best, and without limit.

Designed to be affordable, ultra-compact, and offer best-in-class performance in its pricing category, ATX has been a true champion driving the democratization of intelligent driving. The sensor has already secured design wins with 12 major OEMs. In May, Li Auto announced its entire L series EV lineup will be integrated with our ATL LiDAR, a specialized variant of ATX as standard configuration, delivering even sharper 3D perception. In addition, we recently secured a major design win with Zeekr to integrate ATX across several of its top-selling models, including a standard integration in the newly launched luxury Shooting Brake sedan, the Zeekr 007 GT.

At the same time, ATX is extending its reach with extended partnerships, landing new design wins with Great Wall Motors' EV brand Ora, Chery iCar, NIO's new energy lineup, and the upcoming model from GAC Aion in the mass market. With a rapidly growing roster of leading OEMs and flagship vehicles, ATX entered mass production in Q1 and made an immediate impact with close to 40,000 units shipped in its very first quarter on the market, powering models such as Leap Motor's C10, the industry's first vehicle offering an advanced ADAS at the RMB 120,000 price point with LiDAR hardware.

According to public data, Leap Motor's C10 saw over 15,000 orders within just the first hour of its launch in March, with more than 70% opting for the LiDAR-equipped version, reflecting its strong appeal in the mass market. As part of our expanded strategic relationship with Leap Motor, we have secured a landmark order for 200,000 units of Hesai's ATX LiDAR, which is set to power a wide range of Leap Motor's production models starting in 2025. Internationally, we are also achieving breakthroughs.

In addition to our exclusive design win with a top European OEM, a multi-year program across both ICE and EV platforms that extend into the next decade, we are excited to share that our business in Japan is rapidly gaining momentum. We recently secured a new proof of concept (POC) development project with a top-five global tier-one supplier headquartered in Japan. This achievement marks the first time they have joined our client portfolio and is a significant milestone in our global expansion, serving as a powerful endorsement of our LiDAR technology in Japan. Hesai has been actively driving five POC programs with four top global OEMs and tier-one suppliers across Europe and Japan.

Three of these programs were successfully completed in the first quarter of 2025. Evaluation results from these programs will be shared with Hesai, paving the way for deeper collaboration between both parties and further refining and enhancing the market appeal of our product. While the POCs do not yet constitute full design wins, they mark significant progress, and we are encouraged by the positive momentum as we look ahead to the next phase of development. As domestic and international OEM demand continues to evolve across level two, level three, and level four platforms, we took a major step forward this April with the launch of our game-changing Infinity I or 10 LiDAR solution, alongside three next-generation automotive-grade LiDAR sensors.

This new platform, in conjunction with these sensors, is available in three configurations. The Infinity IA is built for high-level, level four autonomous systems. We achieve this by combining four AT1440 ultra-high-definition main LiDARs with four solid-state FTX LiDARs acting as a blind spot detector, offering true 360-degree coverage without blind spots. Infinity IB is designed for level three conditional autonomy. It features one new ETX main LiDAR, the world's longest-range automotive LiDAR, which can detect up to 400 meters at 10% reflectivity, paired with two STX LiDARs for enhanced blind spot perception. For level two ADAS applications, Infinity IC brings the perfect balance of performance and cost efficiency using one compact yet powerful ATX main LiDAR.

A core feature of this new platform is a shared architecture across our AT, ATX, and the FT series that features more than 85% component commonality. This means faster development, lower cost, and seamless scalability. These industry-leading solutions are a direct testament to our product's technical strength and our holistic approach to satisfying customer needs. Beyond delivering superior performance, we create comprehensive solutions that integrate our cutting-edge technological capabilities with cost-effectiveness. As a result of this strength, we have won design wins for over 120 vehicle models across 23 OEMs worldwide. Meanwhile, the broader robotics market represents tremendous opportunities, and our LiDAR solutions fit at the core of its growth.

According to Goldman Sachs' estimates, China's autonomous mobility market is set for explosive growth and is expected to expand over the next decade from just $54 million in 2025 to $47 billion by 2035. China is clearly on track to become the world's largest autonomous mobility market. In recent months, we have been at the forefront of a new wave of robotic breakthroughs across China and beyond. As the main LiDAR supplier, we are powering mass-produced next-generation fleets for Baidu Apollo Go, Didi, Pony.ai, WeRide, some of which have already expanded onto the global stage. Today, we are proud to be the world's largest LiDAR supplier for global access.

We are also thrilled to be accelerating with level four autonomy across both long-haul and last-mile logistics. Recently, we signed a new agreement to bring our ultra-high-definition AT1440 sensor to CargoX's level four robot truck fleet. At the same time, we partnered with Zairos to scale its last-mile delivery operations and with Neolix to deploy its unmanned level four vehicles. As level four autonomy moves into commercial deployment, we are proud to be the LiDAR partner helping customers scale smarter, safer, and faster. Beyond transportation, LiDAR is unlocking a world of new possibilities, each bringing fresh opportunities to reimagine the everyday and drive incremental revenue and profit.

We believe that every robot needs LiDAR as a core 3D sensor for precise positioning, mapping, navigation, and protection. Take our JT LiDAR, for example. It has been chosen for the next generation of robotic lawnmowers, delivering superior accuracy, stability, and efficiency over traditional RTK and camera-based systems, especially in signal-challenged or visually complex environments. We also recently expanded our partnership with a leading smart home robotic company in China. Over the next twelve months, we expect to provide 300,000 JT units to this customer, generating meaningful revenue while helping transform everyday consumer products with intelligent, LiDAR-driven capabilities. In summary, Q1 has laid a powerful foundation for what promises to be another transformative year for Hesai.

We stand at a pivotal moment where breakthrough technology meets a new market readiness. With our unmatched technology leadership and scalable production, we are leading the industry to shape the future of mobility. And we are doing it alongside customers who share our mission to make advanced perception and safety accessible for all. Before I hand over to Andrew, I want to share some exciting news. In early May, the US District Court for the District of Delaware has officially dismissed Ouster's patent infringement case against us, with no conditions, no financial settlement, and no injunctive relief. This brings an end to all existing IP actions against us and reaffirms the integrity of our technology.

It is a powerful validation of the strength of our IP portfolio and the years of R&D that power it. We are proud that our innovations have not only withstood strict legal scrutiny but have also prevailed. Our deep passion for technology and our unwavering commitment to R&D continue to give us a real edge, and no legal tactics can change that. With that, I will now turn the call over to Andrew to share more details on our financial performance and outlook. Andrew, please go ahead.

Andrew Fan: Thank you, David, and hello, everyone. I will now go through our operating and financial figures for the first quarter of 2025. For further details beyond what I cover on this call today, I encourage listeners to refer to our earnings release. Our Q1 results highlight the strong sustained momentum. Total revenues soared 46% year over year, reaching RMB 525.3 million or $752.4 million. This impressive growth was fueled by exceptional shipment performance. Nearly 200,000 units were delivered during the quarter, more than triple the volume from the same period last year. Notably, this marks our third consecutive quarter of over 150% year-over-year shipment growth, a clear reflection of both strong market demand and the strength of our operational execution.

The surge in shipments was driven primarily by the rapid adoption of our ATX LiDAR among OEMs, with large-scale mass production commencing in Q1. At the same time, our JT LiDAR gained strong momentum with 45,000 units shipped in the first quarter alone, driving our robotics LiDAR shipments to nearly 50,000 units in the first quarter of 2025, with over 600% year-over-year growth. Meanwhile, our gross margins stood healthy at 42% in Q1, and we cut operating expenses by 9% year over year, reflecting the strength of our disciplined cost management. As a result, we narrowed our first-quarter net loss by 84% year over year to RMB 70.5 million or $2.4 million, while remaining non-GAAP profitable for the quarter.

A performance that was significantly stronger than our earlier guidance and especially notable given that Q1 is typically a seasonally slower period. Looking ahead, we are encouraged by the strong momentum we built in Q1 and we remain confident in our outlook for the rest of the year. For Q2, we are expecting net revenues of between RMB 680 million or $93.7 million and RMB 720 million or $99.2 million, which would be a 48% to 57% increase year over year. This forecast conservatively takes into account the current tariff environment as well as some expected short-term shifts in customer demand to Q3, mainly from U.S.-bound robotics LiDAR shipments.

Despite these considerations, we are projecting total shipments of over 300,000 units in the second quarter, a substantial increase of almost 250% year over year. Even more encouraging, we expect to reach GAAP breakeven in Q2, remaining firmly on track to hit our full-year profitability targets. Despite navigating a dynamic tariff environment, as the global environment continues to evolve, we will remain proactive, refining our strategies to ensure minimal disruption to our long-term growth path. We are confident that our products will remain highly competitive even in a tariff-impacted landscape. And if cost adjustments are needed, we will take a measured approach to pricing, always focused on delivering strong value to our customers.

At the same time, we are prioritizing long-term resilience with strong momentum behind our overseas manufacturing plans to swiftly mitigate geopolitical risks and better serve our global customers. In May, we signed a lease for our new factory in Southeast Asia, a decisive first step forward. To conclude, Q1 represents an exceptional start to 2025, with outstanding performance across revenue, shipments, margins, and cost management. We have laid a solid foundation and are confident in our ability to sustain this positive momentum in the coming quarters. This concludes our prepared remarks today. Operator, we are now ready to take questions.

Operator: If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to the management team in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond, and then feel free to follow up with your next question. Your first question comes from Tina Hou from Goldman Sachs.

Tina Hou: Hi. Thanks, management, for taking my question and congrats on the strong result and strong guidance. So my question is mainly regarding our full-year guidance. Since we have seen, I think, starting from the beginning of the year, we have seen a very strong take rate for LiDAR from both premium OEMs as well as mass-market ones. So wondering if we are still maintaining our annual shipment guidance for 1.2 to 1.5 million, or do we see more, like, upside from there? And also related to that, as the ADAS LiDAR portion becomes larger for our entire portfolio, how do we see the trajectory for our gross margin, and where could 2025 total company gross margin end up? Yeah.

That is my main question. Thanks.

Andrew Fan: Tina, thanks for the question. Let me take this first. Regarding our 2025 full-year guidance, despite the evolving tariff environment, I think we are still maintaining our 2025 revenue guidance at RMB 3 to 3.5 billion. The total shipment remained at 1.2 to 1.5 million and 40% in gross margin with RMB 200 million to 350 million GAAP net profits for 2025. So we maintain our 2025 full-year guidance unchanged. I would also like to share some information about our Q2 guidance. In the upcoming quarter, and the current quarter, our revenue is expected to reach about RMB 680 to 720 million.

Strong year-over-year growth of about 48% to 57%, driven by the rapid adoption of LiDAR in passenger vehicles in China. This forecast conservatively takes into account the current tariff environment as well as some expected short-term shifts in customer demand to Q3, mainly from the U.S.-bound robotics LiDAR shipments. In Q1, we shipped about nearly 200,000 units in total, up over 200% year over year. We expect the shipments to continue accelerating through the year with Q2 shipments reaching over 300,000 units. The ATX LiDAR, which has a market price at around $200, entered mass production in Q1 and is ramping up shipments in Q2, expected to account for about 50% to 60% of total deliveries in Q2.

With all these ATX LiDAR shipments in consideration, our GP margin is expected to remain healthy at around 40%. As you can tell from our Q1 gross profit margin, with the ATX ramping up, our quarter-over-quarter margin still enjoyed a moderate improvement. Therefore, we are still very positive about reaching the full-year gross profit margin targets. On the bottom line, despite the typical seasonality in Q1, we achieved non-GAAP profitability and significantly narrowed our GAAP net loss by 84% for Q1, well above our previous guidance. We anticipate a further quarter-over-quarter improvement in Q2, reaching the breakeven point on a GAAP level. That is my response to the questions of Tina. Hopefully, that can address the questions you just mentioned.

Tina Hou: Yes. That is very clear. Thanks, Andrew.

Operator: Thank you. Your next question comes from Jessie Lo from Bank of America. Please go ahead.

Jessie Lo: Hi, David, Andrew, and management team. Thank you for taking my question. My first question is regarding the ADAS LiDAR ASP trend. As we currently supply ATX, or ATL, and also existing ATP products to our clients, and then after we migrate to AT1440 and also ET and even potentially, like, next year for the overseas clients, how do you foresee the ADAS LiDAR ASP trend?

Andrew Fan: Thank you, Jessie. Starting from Q1, since our product mix has started to shift meaningfully with the ramp-up of ATX mass production, our blended or average ASP will be naturally brought down. But it does not tell the full story. It is more helpful to look at the ASP volume trends by products. For 2025, we have three variations of the AT series in production. First, our ATP LiDAR will see a moderate ASP decline in the low teens year over year, reaching around $350 in 2025. The ATP is expected to account for a low six-figure shipment volume in 2025, with production scheduled to conclude by the end of this year.

Then we will have the ultra-high-performance AT LiDAR built for L3 applications, which carries a higher ASP of about $500 but is being shipped in relatively smaller volume this year. We expect large-scale shipments of these high-performance LiDARs to ramp up starting in 2026. Lastly, our ATX LiDAR, the most cost-efficient compact version, with a market price at $200, started mass production in Q1 and has already been adopted as a standard feature for many popular car models. Large volume orders, customers typically receive a modest discount off the market price, a common practice across the supply chain industry. While the ATX brings down the blended ASP, it opens up much larger volume potential.

We project ATX to ship in the high six-digit range, possibly up to a million units in 2025. At present, we do not anticipate new market products pricing another half of the ATX. For the foreseeable future, the ATX will remain Hesai's flagship long-range LiDAR, offering high-cost performance. Overall, while the mix is shifting, we believe LiDAR content per vehicle will remain stable in the long run given its irreplaceable safety and functional value. With the adoption of L3 driving the need for multiple LiDAR units per vehicle to enable full 360-degree coverage, we expect LiDAR content per vehicle to stay in the range of $500 to $1,000. Jessie, that is my response to your question.

Jessie Lo: Thank you, Andrew. And then I have a second question regarding our capacity and CapEx. So, earlier in the last conference call, we mentioned that towards the end of this year, we will be expanding our capacity domestically to two million units. So could you share some of the progress on that capacity expansion? And then on top of that, you also mentioned that we just found a lease in Southeast Asia. And then what is the current, like, CapEx will we look like for the Southeast Asia capacity? And also, the total production unit and potential, like, profitability from this overseas plant. Thank you.

Andrew Fan: Okay. So as of now, as you just mentioned, we have about two million production capacity guided by the end of this year. To give you an update on that, we are building up new production lines starting from Q1, which will begin mass production in Q3. Therefore, this 2 million production capacity is being installed on track. Also, on top of that, we have more production lines in the planning stage, which might start building up this year. And it typically takes us four to five months to set up a new production line in China. Our operations are very lean and efficient. Meanwhile, I would also want to comment on our overseas expansion plans.

We are making good progress on our overseas manufacturing plants, which are a key part of strengthening our long-term resilience under the current geopolitical environment. To better manage the risk and support our global customers more effectively, we have signed the lease contract for our new overseas factories in May, making a key step forward. We plan to break ground later this year and expect the facility to be up and running by late 2026 or early 2027 to support the demand of our overseas customers. Our highly automated production technology enables us to set up an overseas production line with controlled and efficient CapEx.

To summarize, we expect that our 2025 CapEx should be around $30 to $50 million in total.

David Li: Hi. This is David. I want to give you some insight on the ASP. So there are really two ways to reduce or improve the cost structure of our products. The first one, I think, is by design. It is really the integrated circuit, the ASICs, and it is really the innovation. So for each generation, obviously, we designed that roughly two years ahead of the shipment. And then for the domestic market. And the way we look at it is that, okay, we think about it. The volume, we think about it. We should reach at the price. And we sort of reverse that back into the cost structure.

And by that time, we already factor in how many we are expected to ship for the lifetime of the product, at least for the first two, three years. So that is why if you look at the results of the ASP, it is very predictable. Right? It starts with above $500 and slowly declines. But it is within the expectation because we already designed the cost structure based around that. The second reason is that it is still the economies of scale. And as you can see, the ATX and ATL product, what we are shipping this year, the volume is much higher than the ATP.

So, and then it will grow to another level next year with very high certainty. That is where we see a slow decline of ASP. Similarly, with products like ETX, but you will not be able to expect a decline. That is all into the range of half in that. Simply because if you look at the original design, the architect of such a product, it will have a slow decline on ASP, but it does not have the room to continue to the 50% level that is not designed. So that is how we see the price will change down the road.

Jessie Lo: Thank you, David. Thank you, Andrew. This is super helpful. That is all from me. Thank you.

Operator: Thank you. Your next question comes from Tim Hsiao from Morgan Stanley. Please go ahead.

Tim Hsiao: Hi, David, Andrew, and management. Thanks for taking my question. I have got two questions. The first one is about the competition. Because we noticed that one of Hesai's local provider peers is reportedly winning the project from brands like Xiaomi and Leap Motor, which I think are both Hesai's key clients. So is the management team concerned about the potential reshuffles? Some I think your company used to be the sole supplier to the top-notch car EV makers like Xiaomi. And what is the implication for our orders and the potential price competition? That is my first question. Thank you.

Andrew Fan: Thank you, Tim. We do not want to comment on market speculations because ultimately, orders and official announcements speak for themselves. The LiDAR industry has been a very competitive arena since its inception, and currently, only a few players possess massive production capabilities for performance quality and reliability over time. Notably, we have observed a consistent trend of our ADAS customers switching from our competitors, which underscores Hesai's robust competitive edge. I would say winning a contract does not mean mass production and does not mean they can generate meaningful revenue from this contract. Strategically, we chose to collaborate with high-quality promising clients to ensure reasonable pricing and maintain healthy financials.

Our customer base comprises top-tier OEMs, reflecting our commitment to quality partners. Unlike the internet industry, the LiDAR sector requires a long-term perspective. Our goal is to build a sustainable industry, avoiding short-term gains at the expense of long-term viability. Achieving a win-win scenario with our clients is our ultimate objective.

David Li: Alright. This is David. I think it is kind of unfair for Andrew to ask Andrew to comment on competitors, especially this year. So maybe I will offer some of my pocket information. I am actually aware of that, which you mentioned. And I think it is a speculation always maybe, and it is difficult for an existing vendor like us to prove the negative. I think it is in every customer's best interest to continue to understand what is available on the market, and they do. Everyone does that. It is just a common practice.

But in the end, you have to provide your unique value proposition for your quality, your performance, and, you know, and the pricing as a combo. Especially when you already are an incumbent player for OEMs. There is a lot of inertia in this, in terms of the data compatibility, and also their vehicles are designed around your sensor. So there is a pretty high bar for a second vendor to be able to step in, especially during the phase where everybody is rushing to upgrade their products to the smaller, better, sensor to take it to the next level. So the answer is we are actually aware of it.

In the end, you should refer to the announcement of the OEM to know what is really going on, and I would not just make decisions or speculations based on rumors.

Tim Hsiao: Okay. Thank you very much for the details. My second question is about the new products. Because during the presentation, I think, David also mentioned new solutions, the Infinity I. So just want to gather a little bit more colors about when do you think the shipments or mass production will start and the potential client rings? Of course, the value content would be much higher, but could you give us a rough idea about, you know, the rough range of the value contents and the margin? So this is the new solution. Yeah. That is my second question. Thank you.

Andrew Fan: Okay. I will first provide a response to the question about our launch of the Infinity I. We are very proud to be the first provider of a full stack of L2 to L4 LiDAR solutions. We have seen very encouraging feedback from our OEM customers since the launch of our new Infinity I. One of its key strengths is its flexibility. Infinity IA, IB, and IC are built on a shared architecture but are tailored to different customer needs and system setups. Depending on the OEM's vehicle platform and the software stack, each configuration can support anything from L2 all the way to L4 autonomous driving.

All of our primary LiDAR sensors deliver outstanding performance, but each is optimized for specific technical priorities. The AT1440 boasts the world's highest angular resolution, delivering ultra-high-definition image-level point clouds. The ETX, which is a core part of our Infinity I solutions, is engineered for superior ranging capabilities, offering best-in-class detection distances. Both AT1440 and ETX are high-performance LiDARs, each priced above $500. The ATX, which is a core component for Infinity IC, priced around $200, represents our cost-effective solutions, combining compact design with robust performance. The choice among them depends on the specific autonomous driving capabilities of our customers.

All three models, i.e., AT1440, ETX, and ATX, are suitable for L2 to L4 applications and have all secured series production design wins. These design wins are a strong validation of the Infinity I solution's adaptability and the technical differentiation across our LiDAR portfolio. And as we repetitively conveyed messages to the market, though we have different price ranges for our different products, when we designed the pricing, the architecture of the product, and also the cost components of the product, we always aim for healthy and relatively stable gross margin targets.

Therefore, as you can tell from our historical gross profit margin performances, I would like to assure you that the gross profit margin will not fluctuate significantly in the future due to the change of product mix with these new products launching.

Tim Hsiao: Great. Thank you very much for sharing all the information and congratulations on the really solid result again. Thank you.

Operator: Thank you. Your next question comes from Bin Wang from Guotai Junan Securities. Please go ahead.

Bin Wang: Hi, management. This is Bin Wang from Guotai Junan Securities. Thank you for taking my question and congratulations on the strong results and guidance. So my question is about the tariff. Could you please share some details about the impact of the Trump tariff on pricing, supply chain, etc., and how to deal with this problem? Thank you.

Andrew Fan: Okay. So we have closely monitored the situation of tariffs, which is changing on a daily basis, and have conducted a thorough analysis of the potential impact. While the tariffs do introduce certain cost considerations, we believe that their impact on our overall business will be limited for three primary reasons. First, our direct exposure is very limited. The U.S. market is projected to account for only 10% of our total revenue in 2025. Secondly, only 5% of our total revenue or 50% of the revenue from the U.S. is under the so-called DDP terms or delivered duty paid models, where we, as the seller, bear the cost of tariffs.

And thirdly, we will continue to focus on operational efficiency and cost control, and also our market position gives us the flexibility to effectively manage external challenges like those, and we have a relatively strong market position against our customers. Moreover, we have several levers, including adjusting the pricing strategies and efficiency gains, which will help absorb or offset these tariff-related costs. When we provided our profitability outlook in our last earnings call, which was in March this year, we had already assumed a 45% tariff as our base case scenario. We have seen some customers front-load or reschedule their orders due to the uncertainty around future policy changes, especially after April.

But depending on the current shipment and delivery schedules, this may shift some of our revenue from Q2 to Q3. That is also part of the reason why our Q2 guidance is presented as a range. For the full year, we are keeping our revenue guidance unchanged at RMB 3 to 3.5 billion. We have not seen our major customers canceling their orders due to these tariff changes. For the full-year targets, our gross margin target remains healthy around 40%, and we expect that the current impact from tariffs on our full-year gross margin and profitability to be immaterial.

David Li: I want to also add to the tariff topic. So, the first is obviously a small percentage of our revenue today is already from the U.S. And there are really two types of customers. What they face, the tariff. A small part will treat this as a when it was really high and they treat this as unacceptable. So they just pause. They are not canceling because they could not find an alternative, or they were pausing for some time until they came back down to where it is now. And the other part is actually front-loading more because they realize that there is a risk down the road that it could go back up again or face other challenges.

An easier solution is just to switch over at all. So they actually try to buy more. And at the price, they are okay. And they feel like it is a reasonable number, especially now. And they just wanted to make sure the continuity of their supply chain is guaranteed. So that is why we also see some of the customers placing, let us call that, for lack of a better word, revenge orders. So we see both types of customers.

Bin Wang: Thank you. That is very clear and helpful.

Operator: Thank you. Your next question comes from Olivia Zhang from BOCI. Please go ahead.

Olivia Zhang: Thank you, management, for taking my questions. My first question is regarding our new ADAS product ATL and ATX. We noticed that our key client, Li Auto, has newly launched models, all integrated with Hesai's ATL LiDAR, which is a customized version based on ATX. But most other OEM customers all choose the standardized ATX version. So for Hesai, is there any difference between ATL and ATX in terms of ASP, cost, and gross margin? And in the future, will the standardized ATX remain as a mainstream solution for OEM customers, or will more OEMs follow Li Auto to adopt a specialized one?

David Li: Okay. I will give some of the background of this product. It is a variant, but it is an enhanced and advanced version with enhanced resolution and a few other things. The main idea behind that is that, well, we wanted to keep the standard as the platform for a specific customer like Li Auto. They are very particular about the specific advanced functions of that LiDAR because that is what they see as needed as they develop their AD Max platform. So in a way, it is a customized version for them and to best match the requirements of their software. In the ideal world, maybe every customer has something that looks different than others want.

But in Li Auto's specific case, we have very particular requirements that are above the standard ATX, and we were able to meet that. And so that is the nature of such a product. And we do not have additional information on the price or the gross margin, but it remains largely in line with the typical platform.

Olivia Zhang: Okay. Got it. And my second question is related to the Robotaxi LiDAR. Recently, we see that Baidu, Didi, Pony, all adopt our ADAS product, the AT series, to replace the traditional mechanical LiDAR for cost reduction. Just wondering, is the usage of ADAS LiDAR by these L4 players a transitional temporary solution for the Robotaxi industry? Looking ahead, will we develop a specialized product series for Robotaxi, or will we continue to sell ADAS LiDAR to these L4 players? Thank you.

Andrew Fan: I am glad that you asked this question as Hesai is the largest Robotaxi LiDAR supplier globally, with 60% to 70% market share. Our main LiDAR products are widely used by all the top Robotaxi players in China and outside China. Historically, Robotaxi operators have used mechanical spinning LiDARs for small fleet testing and operations. However, recent trends in China indicate an urgent need for scalability in the Robotaxi fleets. By adopting our flagship ADAS LiDAR on Robotaxi, our customers achieve a better balance between price and performance of the sensors, enabling faster fleet growth and helping them become closer to profitability.

As a result, we are expecting to receive significantly larger LiDAR orders for use in Robotaxi for the years to come. Historically, on the Robotaxi side in China, we expect that moving from smaller-scale high-priced mechanical LiDARs to larger-scale ADAS LiDARs will boost our revenue and gross profit in the long run as the Robotaxi business grows in China. Meanwhile, global Robotaxi companies continue to rely on mechanical spinning LiDARs to ensure the highest sophistication of their AD solutions. Take this, for example, from the earnings. We are the exclusive supplier to a top global Robotaxi player, and their fleet has already racked up nearly a million autonomous miles in 2024.

Now they are gearing up for a bigger expansion in 2025, scaling their self-driving fleet in a big way, all powered by our Panda series LiDARs. With the Robotaxi market rapidly advancing towards large-scale commercialization, our technology plays a crucial role in enabling safe and reliable autonomous transportation. Also, when our ATX, AT128, or ATX type of LiDAR is deployed in the Robotaxi, this ASIC-based semi-solid-state design provides a more cost-efficient solution. However, due to its 120 degrees horizontal field of view, Robotaxi typically requires three to four units of our AT series LiDAR to achieve 360 degrees perception. Also, advanced algorithm approach. So that is my response to your question. Hopefully, that can cover that.

Olivia Zhang: Okay. Thank you. Very helpful. Thank you, David and Andrew.

Operator: Thank you. Your next question comes from Zhang Yu from Huatai Securities. Please go ahead.

Zhang Yu: Hi, David, Andrew, and Yuanting. Thanks for taking my questions. My first question is about the global market. When will we deliver LiDARs to the global OEMs? And what is the impact on volume for the next one or two years? And how to estimate the NRE income from the global OEMs this year? Thank you.

Andrew Fan: Okay. Hesai has been actively discussing and cooperating with our global customers. Recently, we have been actively driving five POC programs with four top global OEMs and tier-one suppliers across Europe and Japan, including the most recent POC awarded in Q1 by a top five global tier-one supplier headquartered in Japan. While these POC contracts are not yet full design wins, they play a critical role in the decision-making process. OEMs typically define final product specifications based on POC outcomes and use this phase to validate and co-develop surrounding components.

As a result, suppliers engaged earlier in the POC stage are strategically positioned and may have a higher chance of securing the design win once the OEM issues a formal RFQ. We have secured design win partnerships with five global OEMs, four through their JVs, and most importantly, an exclusive design win with a top European OEM as we announced last quarter. This long-term deal extends into the next decade across both their ICE and EV vehicle platforms, representing the largest global program in the automotive LiDAR industry.

When we refer to the largest global program, it signifies not only our collaboration with this leading global OEM but also the extensive worldwide reach of our shipments spanning China and numerous other international markets. Our quality and performance have become our name card, and our ability to deliver a comprehensive solution bundling both long and short-range LiDARs makes us the go-to partner for global OEMs. The market potential is just massive.

Global LiDAR penetration is nearly zero today, but as both ICE and EVs start to adopt ADAS and LiDAR, we are unlocking an additional $30 to $60 billion market in the overseas market in the long run, driven by 60 million overseas vehicles at a $500 to $1,000 LiDAR content per car as we estimated. That is my response to your question, Zhang.

Zhang Yu: Oh, thank you. It is very helpful for me. Thank you. That is all my questions.

Operator: Thank you. Your next question comes from Sia Huang from SSPDBI. Please go ahead.

Sia Huang: Good morning, management team. Thanks for taking my question. This is Sia from SSPDBI. And I have got just one question about our dual listing plan at Marketoumer. Saying that Hesai has confidentially filed for a Hong Kong listing. How do we respond to this?

Andrew Fan: Okay. Thank you for asking this question. Regarding this market speculation about our dual listing plan in Hong Kong, I have no comment on that. That said, we periodically evaluate all possible and available options, including listing on other stock exchanges, to protect our investors' interest and sustain our growth trajectory. Rest assured, our commitment remains steadfast to the company's long-term success in the capital markets. I guess the reason why you ask this question or the market is so focused on this is related to the market rumors about the potential delisting of China ADRs from the U.S. market.

Based on the advice of our SEC compliance counselors, there is no legal or factual basis on the current NASDAQ listing rules or past precedent that support the divesting of Hesai from any government bodies. To date, we have received no inquiries, no investigations, nor communications from NASDAQ concerning the potential delisting or similar actions. Based on the currently available information, we do not find any concrete legal risk of being delisted from NASDAQ. At this time, we are fully compliant with all the regulatory requirements from NASDAQ's markets. Yeah. I do not know if people will respond to a confidential filing. But the entire point is it is confidential.

Sia Huang: That is very helpful. Thank you, David, and thank you, Andrew.

Operator: Thank you. Your next question comes from Joanna Ma from CMBI. Please go ahead.

Joanna Ma: Hi, management. Thanks for taking my question and congrats on the solid results. So I have a question regarding could you please share with us your view on the impact on the LiDAR industry development from the latest AEB draft for soliciting opinions? Thank you.

David Li: I will take it on the AEB question. I think it is very important. Hello? Can you hear me?

Joanna Ma: Oh, yes. Yeah. Thank you.

David Li: Yeah. I think it is taking such a technology to the next level. And, historically, the idea is if you buy a car with a LiDAR, you have a few more functions. Some type of NOA, blah. And people can always say, no. I feel very comfortable driving my own car, or I feel like I am safer than the car driving itself. So that is where LiDAR was about. And then starting from last year, AEB takes us to a new domain in which it will trigger no matter you turn it on or not if it sees a risk. Essentially, it becomes a feature of an invisible airbag.

It is even better than an airbag because, obviously, it can stop a crash before it crashes. So the entire penetration of AEB with LiDAR became much faster than the previous round for that reason. And this is what we see the entire LiDAR industry, the AEB industry is now rushing to have most of the vehicles have a 100% take rate for LiDARs, and almost everybody is doing that because now you buy a car, you do not want people to see to worry about not having a LiDAR.

And now we are also seeing a lot of the discussion at the regulatory level because clearly, having advanced ADAS function with the ability to detect in complex environments is a must, and most people agree LiDAR is a critical part of such an effort. So that is why you see the penetration rate is quickly going up. And now the marketing for different OEMs is focusing on not only the computation but also LiDAR. Many car launches today will have explicitly a page about LiDAR adoption in their car because no one wants to be not future-proof.

Joanna Ma: Okay. Got it. That is really helpful. And my second question, also, can management share with us your outlook on the room for operating efficiency improvement? In the coming years, while and also are there any updates regarding the outlook for your CapEx? Thank you so much. Thank you.

Andrew Fan: Okay. Let me answer this question. The second question first, the CapEx, I have guided that we expect our full-year CapEx to be around $30 to $50 million in the current year. For the OpEx, on a non-GAAP basis, our OpEx in 2024 is about RMB 1 billion. And about 65% of the OpEx is R&D, and 15% goes to sales and marketing, and the rest are the G&A. In 2025, we actually guided that we are going to we expect that we are going to achieve an RMB 100 million savings in the GAAP basis OpEx. We are committed to taking expenses management to the next level, ensuring even better efficiency and financial discipline.

As you can tell from our Q1 results, our OpEx declined by about 9% on a quarter-over-quarter basis, which is in line or even slightly better than the full-year cost-saving target. Our headcount for 2025 currently is about 50% for R&D staff, 15% for production, and the remaining is the sales and marketing and G&A-related employees. Also, I would like to highlight the importance of the operating leverage. We have spent over a decade building a strong and stable organization structure, which is what we called a large mid-platform with a lean front end. This allows us to scale our business without significantly increasing R&D expenses while our revenue and gross profit grow.

Therefore, we expect our R&D investments to remain relatively stable on the absolute amount, even as our revenue and gross profit continue to grow at a solid pace. Internationally, our ADAS business is still in the early stage and contributes a relatively modest share of total revenue as of today. At the end of the at the same time, we are allocating some of the R&D resources to support our global programs. In our robotics segment, most of the costs are tied up to our global sales network. On the product side, we are benefiting from our platform-based development. So we are not starting from scratch. In each application of robotics, which helps us scale more efficiently. Yeah.

That is my answer to the question you just raised.

Joanna Ma: Okay. Got it. That is really helpful. Thank you, David. Thank you, Andrew. And congrats again.

Operator: Thank you. As there are no further questions, I would like to now turn the conference back over to the company for closing remarks.

David Li: Thank you once again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes this call, and we look forward to speaking to you again next quarter. Thank you, and goodbye.

Operator: This concludes today's conference call. You may now disconnect your line. Thank you.