1. The financial situation for Q3 in 2023:
1. Q3 financial data improved, and the Q4 guidelines were in line with expectations
Total revenue for Q3 in 2023 was RMB 28.6 million (approximately US$3.9 million), up 247.9% year-on-year from Q3 in 2022 and 186.0% over Q2 in 2023. The increase in revenue was due to a significant increase in sales of the EH216 series, with Q3 delivering 13 units compared to just 4 in the same period last year.
Gross margin continued to remain at a high level of over 60%, at 64.6%, a slight decrease of 1.3 percentage points from 65.9%, and an increase of 4.4 percentage points from 60.2% over the previous month. The month-on-month increase was mainly due to the higher average sales price of EH216 series products.
Q3 adjusted net loss was RMB 31.3 million (US$4.3 million), a year-on-year decrease of 43.1% and 39.5% month-on-month. Due to the increase in Q3 revenue, the three operating expenses stabilized, and the adjusted net loss narrowed sharply.
As of September 30, 2023, cash and cash equivalents, short-term investments, and restricted short-term deposits were approximately RMB 295.6 million (approximately US$40.5 million). The book capital is sufficient, and the ability to withstand risks is still strong.
The company expects Q4 revenue in 2023 to be about 56 million yuan, up 257% year on year and 96% month on month. Total revenue for the full year of 2023 is expected to be around RMB 118 million, an increase of 166% over the previous year.
The company's chief financial officer said in an earnings call that the company's current monthly cash expenditure is about 10 million yuan, and the book cash is sufficient to meet the company's anticipated working capital requirements. Furthermore, with the increase in EH216-S sales and the steady commencement of commercial operations after TC, the company expects to generate positive cash flow around the second half of 2024.
2. Order demand and delivery and industrial layout
Since Q3, the company has announced many business developments, including signing strategic cooperation agreements with various local governments and receiving site construction, orders or financial support:
(1) As the “bridgehead” of the low-altitude economic circuit, Shenzhen has announced a number of support policies to support the development of the low-altitude economy, and will also provide various support to the company in various areas such as policies, infrastructure, applications, and financial subsidies. In July of this year, the company reached an air traffic strategic cooperation with Bao'an District of Shenzhen. Currently, based on strategic cooperation with the company, Bao'an District is speeding up the construction of the “Wings of the Bay Area” urban air traffic operation demonstration center located in Happy Harbor. In September, the company delivered 5 EH216-S to local customer Bosling in preparation for Bosling to provide flight operations in Bao'an District. In addition, according to the signed intentional procurement agreement, Bo Ling intends to purchase 95 additional EH216-S aircraft from Eair to be deployed in Shenzhen in the future. On November 20, the Shenzhen Municipal Committee held a special conference to study and deploy low-altitude economic development work. Recently, seven ministries and commissions, including the National Development and Reform Commission, once again promoted and drew on the innovative initiatives and typical experiences of Shenzhen's comprehensive reform pilot. The 22 experiences include “innovating new mechanisms for low-altitude economic development.” It made the market look forward to “Castle in the Sky” even more.
(2) Strategic cooperation with the Hefei Municipal Government to establish an East China regional headquarters in Hefei will receive various support from the Hefei Municipal Government with a total value of 100 million US dollars, including financial support, and coordination or promotion of purchase orders for no less than 100 EH216-S vehicles. In the future, Ehang Intelligent plans to carry out the normal operation of unmanned aerial vehicles in Hefei's Luogang Central Park.
(3) Internationally, in November, the company announced the completion and opening of its first urban air traffic (UAM) center in Europe at Lleida-Alguaire Airport (LEDA) in Spain. This is the first UAM center for unmanned electric vertical take-off and landing (eVTOL) aircraft in Europe, and will become a model for the effective integration of global eVTOL aircraft operations with airport infrastructure, air traffic management systems, operation processes and other information technology.
(4) In addition, the company strategically invested in Shenzhen Xinshijie Technology, a domestic lithium metal solid-state battery technology company, in September, and will cooperate with Xinshijie to develop and produce solid-state lithium batteries suitable for the company's driverless eVTOL products, which is also an important measure to lay out and strengthen the upstream battery supply chain. In the future, Eaviation will continue to push for the completion of test flights of high-energy density batteries, hoping to achieve a doubling of flight performance for subsequent use in new products and new application scenarios.
Currently, the company has more than 450 orders for driverless eVTOLs in domestic and overseas markets in Asia, more than 245 domestic orders, and 210 pre-orders for overseas markets in Asia. Of these, 90% of the order reserve is EH216-S. Domestic order reserves will be delivered in batches according to customer needs. Usually, customers purchase 3-10 EH216-S units in advance to prepare for operation or trial operation, and then purchase more products according to operating requirements. The company expects Q4 after receiving TC to see a significant increase in delivery volume. In terms of production, production work is currently being steadily promoted at the Yunfu production base in accordance with the EH216-S model certification under the review led by the Central and South Regional Administration of Civil Aviation of China. The first batch of certified EH216-S will finish production offline in Q4 this year and be delivered to customers for use.