EHang Holdings Ltd - ADR Stock

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang Second Quarter 2026 Earnings Conference Call.

Please note that management's prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese and the corresponding simultaneous or consecutive interpretation can be accessed on the English line.

As a reminder, all translations are for convenience purposes only. In case of any discrepancy, the management's statement in the original language will prevail. To listen to the original remarks by management, please join the Chinese line.

Additionally, both the Chinese and English lines are open for questions, 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.

[Interpreted] Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the second quarter of 2026. 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. Hu Huazhi, our Founder, Chairman, CEO; Mr. Feng Shuai, CTO; Mr. Wang Zhao, COO; and Conor Yang, CFO.

Before we continue, please note that today's discussion may 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 these 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 by law.

Also, please note that all numbers presented are in RMB and are for the second quarter of 2026, unless stated otherwise.

With that, I'll turn the call to our CEO, Mr. Hu Huazhi. Please go ahead.

[Interpreted] Good day, everyone. Thank you for joining our Q2 earnings call. Since Q2, EHang has entered a vital strategic transition moving beyond the certification toward operational readiness, scenario validation, capability development, and global expansion.

Certification is just the entry ticket to commercial operations. What really determines whether a company can sustain flights and commercial operations. It's not just about having an aircraft or a certificate, it's about having an end-to-end operational capability, replicable solutions, a solid product pipeline and ability to deliver standardized solutions to global markets. We have been investing in these areas and have made meaningful progress. Of course, all of these rely on a sound regulatory environment. That's the foundation that enables qualified capable companies to grow.

In late June, a serious accident involving a piloted light-sport aircraft in China has led regulators to adopt a more cautious approach to safety oversight. While unrelated to EHang's pilotless eVTOLs, this has affected our human-carrying commercial operations approval process in Hefei and the time line remains uncertain.

To be clear, this is a temporary industry-wide timing issue, reflects no change in demand for EHang's products, nor does it indicate any issue with our technology or safety record. Recent accidents highlight that safety, regulation and traceability are baselines for low-altitude commercialization. EHang operates with a pilotless aircraft, preset of fixed routes, intelligent fleet dispatching, centralized monitoring. Our goal is to make urban air mobility safer, more transparent, and easier to regulate.

Pilotless passenger-carrying aviation fundamentally changes in how we travel. We fully understand the regulators' caution, and we respect that. It is a responsible commitment to the public safety. However, technology innovation and regulation must evolve together. More than a century ago when automobiles first appeared, people had similar concerns about this new form of transportation, and U.K. passed the Red Flag Act, which required a person to walk in front of a motor vehicle carrying a red flag to warn pedestrians and limiting vehicle speed. The law was essentially old rules overregulating new technology. History shows that safety validation, operational rules and regulatory frameworks for disruptive transportation technologies all take time to mature. History shows technology and regulation eventually align. New forms of transport don't mature overnight.

EHang's role isn't to sit and wait, but to proactively provide regulators with a real safety data, proven operations and a reliable technology. The EH216-S and its operating system has obtained all key certificates under China civil aviation regulatory framework, TC, PC Airworthiness Certificate and Air Operator Certificate. Our end-to-end system in Guangzhou and Hefei are fully operational. Within our internal trial operations, both have been operating continuously and safely for around 1.5 years with a 4.94 out of 5 passenger satisfaction score. The EH216 series have accumulated nearly 100,000 safety flights. With the demand in product certification and safety records in place, we only wait regulatory approval for public ticket sales.

Despite of this critical transition point, we are confident that commercialization window will eventually open. Amidst uncertainty, EHang isn't sitting still. We're tackling challenges head on and finding new opportunities. Since Q2, we've been pushing hard on 3 things: first, expanding globally on lot of fronts, strengthening domestic readiness while accelerating overseas deployment. In China, we continue to strengthen our end-to-end operations, develop standardized and replicable operating models and solutions. We have completed the preparations across full operating cycle including personnel training, maintenance, insurance services, airspace coordination and emergency response in Guangzhou and Hefei, accumulating practical operating experience.

We initiated a point-to-point trial operations to build experience in advance. Once the regulatory window opens, we will rapidly deploy and help customers operate to standard.

Overseas, our footprint expanded to 23 countries, adding Mexico and Switzerland since Q2. Thailand is running validating flights via Sandbox, and the Civil Aviation Authority of Thailand has established a clear path forward. We're targeting a commercial approval in 2026. We were also selected for Hong Kong's Low-Altitude Economy Regulatory Sandbox X trial project, with flight validation underway and a public event coming soon.

Furthermore, we advanced our Global Fast Track program. Many countries want to bring in pilotless eVTOLs but lack the regulatory framework on how to build a complete path from safety validation to operational standards to commercial deployment. Drawing on a decade experience as well as our engagement with the civil aviation authorities in multiple countries, EHang is turning this experience into a standardized market entry framework. This is the basis of our Global Fast Track Program. It's not simply about selling an aircraft. EHang is providing a standardized methodology, from validation to operational preparation, to commercial deployment, helping local regulators and partners move more efficiently.

Sri Lanka has become the first country to join our Fast Track Program, and we are also engaging with multiple other countries regarding framework. This shifts our global strategy from merely selling products to exporting experience, standards and capabilities.

Second, revenue diversification. Keeping passenger transportation as our strategic focus, while developing nonpassenger carrying business and a broader product portfolio. Passenger air mobility remains our strategic focus while domestic passenger commercialization is still pending regulatory approval. We're actively developing logistics, firefighting and [ aerial building ] media to build additional revenue streams.

We are developing and validating logistics and firefighting aircraft based on our passenger-grade safety technology. These products address real needs such as forest firefighting, port logistics and emergency response. They are moving through testing, certification and customer validation with the potential for faster market deployment.

Alongside a steady progress on the EH216 platform and the VT35 certification and flight test, EHang is building a multi-scenario product matrix rather than relying on a single aircraft. Meanwhile, aerial media revenue surged over 270% year-over-year in Q2 and now expanding to Europe, Japan, Thailand and other overseas countries. We're expanding one-off event performances to regular on-site shows for sustainable revenue and replicable business models.

Third, improving cost efficiency and focusing our resources on long-term competitiveness. Since Q2, we streamlined the organization, refreshing talent structure, cutting non-intentional CapEx, improving efficiency. The outcomes will be visible in the second half. We are focusing resources on things that matter most: core product development, certification capability, operating system, overseas commercialization and business that can generate revenue, deliveries and cash flow.

Over the past decade, EHang's core strength has been getting aircraft flying and our operations running. Now we are turning that into a standardized scalable capabilities. Customers value our ability to guide them from 0 to commercial operations, not just the aircraft itself.

We are validating our development capabilities in China and scaling them overseas, two tracks, reinforcing each other. The demand is real, and the path is proving out. Now we're focused on execution, converting operational capability into orders, deliveries and cash.

Finally, EHang is leading a long-term business. We are breaking technology barriers and help shape industry rules. While navigating the evolving regulatory frameworks requires careful management, our long-term vision remains unchanged.

The end game for low-altitude air mobility remains pilotless flight, but regulation and ecosystems take time to mature. Short-term friction will not alter our direction. When the window opens, EHang will be the first to run through, with the credentials, capabilities and readiness. And the moat we're building through standardized operations will only get deeper.

The strategic direction of the low-altitude economy will not be disrupted by short-term volatility. For 12 years, EHang has focused on making safe flight accessible. We will maintain a pioneer discipline and execute what needs to be done. Thank you.

I would like to invite our CTO, Feng Shuai, to introduce our latest progress in technology and R&D.

[Interpreted] Thank you, Mr. Hu, and hello, everyone. In Q2, our R&D focus on 3 aspects: First, we continued to upgrade existing products and validate operations for current customers and scenarios. Second, accelerated R&D for new products and new applications. Third, deepen core underlying system capabilities. These 3 aspects together build a more complete technology foundation for scaled commercial operations.

First, upgrading the existing products and operational validation. This quarter, we completed a series of upgrades and validations for EH216-S route operations. We established our first point-to-point test route at our Guangzhou headquarters, continuously accumulating trial data. This marks a meaningful step moving EH216-S operations from a single-point takeoff and landing toward a regular route-based operations.

On passenger experience, we completed several key updates. We validated the operational capability of our new battery cooling vehicle. Under test conditions, it increases daily [ sorties ] per aircraft from about 6 to 12 to 15, a meaningful boost for daily capacity. With the same fleet infrastructure, each aircraft can handle significantly more flights per day, which matters a lot for operational efficiency and unit economics. Additionally, our new independent air conditioning system rapidly reduce cabin temperature by 10 to 15-degree Celsius, enhancing passenger comfort.

Second, new product development and scenario expansion. For the VT35, we completed a truck wind tunneling testing and lightning direct effects and [ Li ] production testing for key components alongside multiple flight tests in China to support aerodynamic calibration and airworthiness validation.

Meanwhile, we are extending our technology into new applications. For forest firefighting, we're testing Airbus delivery system with our existing products to enable early-stage crown fire response. Based on the certified EH216-S platform, we're also developing a cargo version. Adapting this mature platform is expected to shorten development and certification time lines.

Our prior work on the EH216-L will also be integrated into this new configuration, ensuring logistic capability continuity.

Third, deepening core systems. On the operational system front, we're building differentiated product globally for 2 key customer types: First, low-altitude operations control systems for operators and aircraft consumer. Second, city-level low-altitude integrated supervision platform for government agencies. The latter covers aircraft use applications, plan filing and review, airspace designation, real-time monitoring, information publication.

This quarter, we focused on 2 key areas. First, improving our platform situational awareness, tiered supervision and emergency response efficiency. Second, deepening system integration with Hefei government Flight Service Center. We've developed a set of framework documents covering airspace destination, operational standards and service process, helping the Hefei Flight Service Center build a city-level low-altitude supervision system. Think of it as a software plus hardware foundation for future large-scale high-density urban operations.

We'll continue holding our product and system development to aviation-grade standards, translating technological breakthrough into a tested, validated and deliverable commercial capability to sustain EHang's long-term leadership in global low-altitude mobility market.

Next, I'll turn the call over to our COO for sales and operational updates. Thank you.

[Interpreted] Thank you, Mr. Feng, and hello, everyone. I'll discuss our Q2 operational progress and how we are approaching lean operations, product diversification, overseas markets and safety systems.

In Q2, we delivered 35 units of EH216-S and 1 VT35. On aerial media side, we completed 22 aerial media shows and delivered 520 units of GD4 drones.

Beyond these numbers, I want to be transparent about our current environment. This year, China's low-altitude economy entered a more cautious phase across safety oversight, airworthiness management and operational regulations. This has been reinforced by the new airworthiness frameworks and civil aviation laws. Recent industry safety incidents have heightened regulation and public attention on low-altitude flight safety, leading to intensified safety inspections of general aviation and low-altitude economy operators, aircraft and operational projects. As a result, it slows our progress our progress, delivery acceptance and commercial operations for some projects, and the passenger carrying commercial operations for low-altitude aircraft has also been affected. So we are being more cautious about our operational expectations and resource allocations. Our CFO will address our adjusted full year revenue guidance shortly. However, we firmly believe that in passenger aviation, safety and compliance must always precede commercial speed.

To be clear, only the local time line for commercialization has shifted, not long-term market demand or EHang's competitiveness. Going forward, we'll keep the market informed with a clear operational progress updates.

Mr. Hu talked about our 3 strategic priorities: global expansion, revenue diversification, and cost efficiency. On the operational level, our approach covers the following areas. First, improving internal efficiency through data management and AI integration.

During the period of external adjustment we haven't been waiting passively. We have been proactively streamlining our organization and focusing our resources. On R&D, we're concentrating our core talent, improving technology reuse across the platforms. On the digital side, we're integrating AI tools into R&D, knowledge management, cross-functional workflow to shorten development cycles and boost productivity.

Our rule is simple. Cost reduction will never compromise safety, product quality or core R&D. We won't sacrifice long-term competitiveness for short-term financials. But we're strictly scrutinizing expenses to strengthen cash reserves and ensure sustainable operations.

Second, strengthening our operational foundation for passenger commercialization. Our Guangzhou and Hefei sites continue to refine flight operations, current support, emergency response and regulatory data integration. Through internal trial operations, we are accumulating real operation data to ensure we're ready to start safe and stable commercial operations as soon as regulatory approval. We're also building -- pilot -- to point capabilities in advance, including route planning, vertical coordination, ground support, aircraft dispatch, contingency handling and passenger services. These are fully operational capabilities for future low-altitude transport.

Take the Erhai Lake project. Ground trip across the lake takes an hour. Our planned route reduces the time to about 10 minutes. The Hainan, Lingao cross-sea low-altitude corridor project has also broken ground. This is the first project under our strategic partnership with the China State Construction Engineering Corporation Sixth Bureau. The key -- first key flight station, the WingHub South Sea is currently under construction. Together, we are building a closed-loop economy that combines infrastructure and operations.

For local governments and partners, EHang delivers more than just an EH216-S. We'll provide a comprehensive solution, including aircraft, command and control systems, scenario planning, route design, vertiport infrastructure planning and personnel training, maintenance, regulatory coordination and safety assurance.

Third, we are leveraging the mature safety architecture of the EH216-S to accelerate the nonpassenger products and specialized applications. Passenger carrying operations are our core direction, but they're not our only growth plan -- our path. We're leveraging the EH216 mature aviation-grade safety architecture, including its flight control, powertrain, redundancy design and command and control for logistics, firefighting, aerial media products, building a diversified portfolio less reliant on passenger commercial approval.

Aerial media remains a key revenue driver. In Q2, completed 22 shows and delivered 520 units of GD4 drones. The business is evolving from a onetime event to regular onsite services. Projects like Chongqing Media Group and [Xing Yi] in Shanxi are helping us to build experience in continuous operations, content production, fleet management and on-site support. Regular commercial shows improve equipment utilization, customer stickiness and revenue predictability.

Overseas, we also deployed GD4 drones across Japan, Thailand and Europe, accelerating international expansion.

On firefighting and logistics, we are working with the customers on product customization, advancing VT35 firefighting drone prototypes and logistic aircraft and trial flagship scenarios in forest firefighting and port logistics.

Fourth, we are accelerating center overseas commercial [ Sandbox ] deployment to build a reputable international pathway. Overseas market is a key part of EHang's long-term strategy and an important platform for validating adaptability, regulatory coordination and business models. In Hong Kong, we're selected as an early participant in the Regulatory Sandbox X trial project. We've chosen [ Cyberport ] as our first sandbox site. Test flight started this month with a public demo coming soon, and additional flight validation and scenario deployment will follow under regulatory oversight.

In Thailand, we have established an efficient communication coordination with the CAAT, and are targeting commercial operations certificate in 2026. This work will proceed according to CAAT review process with the final time line subject to the regulatory schedule.

Based on the Sandbox experience, we launched at the Global Fast Track Program, a 4-stage framework of regulatory alignment Sandbox build validation flights and commercial launch designed to compress the time line for market entry to commercial operations. Sri Lanka is the first country to formally adopt the program. Over the coming months, we'll accept the project deployment in Sri Lanka according to the Fast Track road map.

Fast Track does not bypass local regulatory processes or lower safety or airworthiness standards. Instead, it reuses technical documentation, safety data and our accumulated operational experience to reduce duplication and improve the efficiency of project collaboration, regulatory engagement and local operational setup. Beyond Sri Lanka, we are also exploring this program in Central Asia. Through the program, we aim to transform individual overseas projects into a standardized replicable capability, providing a clear, compliant and efficient implementation pathway for more countries and regions to introduce pilotless eVTOLs.

Fifth, we are building operational standards and safety foundation to convert our first-mover advantage into a sustainable competitive moat. Over the years, we have accumulated nearly 100,000 safety flight records and these flights span diverse geographies, weather conditions, terrain application scenarios and operating environments, providing a critical data foundation for continuous improvement in aircraft performance, operational procedures and command and control systems.

We are working with airworthiness and operational experts to advance air operator certification standards. The goal is to turn our accumulated flight experience and internal operational capabilities into a standardized, verifiable, replicable operational benchmarks and the industry can use. At the same time, we are building comprehensive aftersales support network covering delivery, personnel training, spare parts, maintenance, data support and emergency response. We need to have the organization systems and service capability in place to support scaled operations before commercial scale-up actually begins. While this may not immediately reflect in short-term revenue, establishing these scalable service capabilities now ensures so we can rapidly capture market demand once the commercial window opens. We'll continue translating investments into efficiency, building quality products and closing the loop on operations by enforcing lean management, diversifying revenue and establishing robust safety standards, we will build a sustainable competitive advantage and earn investor trust with verifiable results.

Thank you. Next, I'll pass the floor to our CFO for financial updates.

[Interpreted] Hello, everyone. I am Conor, CFO of EHang. Before I go into details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR website.

Next, let me walk you through the key financial data for Q2. In Q2, revenues were RMB 77.9 million, down from RMB 113.3 million in Q2 2025, but up significantly by 203% from RMB 25.7 million in Q1 2026. The sequential increase was mainly driven by higher sales volume of the EH216 series and with the additional contribution from VT35 aircraft. The year-over-year decline was due to lower sales volume of the EH216 series compared to the same period last year.

Gross margin in Q2 was 61.2% compared with 61.5% in Q2 2025 and 62.5% in Q1 2026. Overall, gross margin remained stable. Our stable margin profile reflects the competitiveness of our products as well as our continued strength in manufacturing efficiency and supply chain management despite changes in quarterly revenue and product mix.

Turning to operating expenses. Adjusted operating expenses, defined as the total operating expenses excluding share-based compensation, were RMB 112.7 million in Q2, representing a 16.9% increase year-over-year and 11.5% increase quarter-over-quarter. The increase in operating expenses primarily reflects the combined effect of our phased strategic business investments and the transition costs associated with the organizational optimization during the period. We continue to make targeted investments in commercialization, global expansion and R&D to reinforce our long-term competitiveness.

It's worth noting that Q2 expenses haven't yet fully reflected the outcomes of our organizational optimization and CapEx control measures. As these initiatives were mostly rolled out during the quarter, we expect the outcomes to gradually show in the coming quarters. Going forward, while protecting our core R&D, airworthiness, operating and global expansion facilities, we'll continue to improve the resource efficiency and reduce nonessential spending and maintain strict cash discipline.

As we continue to invest in our future growth, our Q2 profitability was affected by both revenue scale and operating expenses. Adjusted operating loss in Q2 was RMB 62 million, compared to RMB 77.1 million in Q1 2026. Adjusted net loss was RMB 58.5 million, compared to RMB 75.6 million in Q1 2026.

As of June 30, 2026, our combined cash and cash equivalents, short term and treasury investments totaled RMB 929.4 million. This healthy cash position provides strong support for our continued commercialization efforts, corporate development, global expansion and day-to-day operations.

Turning to our full year guidance. Given the regulatory policies and supporting mechanisms for low-altitude human-carrying commercial operations are still evolving, there remains uncertainty around the timing of domestic commercial operations. Accordingly, the company has decided to withdraw its previously-issued 2026 annual revenue guidance of RMB 600 million. The company will not provide a replacement of full year revenue guidance at this time. As the regulatory environment and business visibility become clear, we'll provide an updated outlook to the market when appropriate.

In the meantime, the company will continue to provide a transparent and timely updates on key operating milestones. This includes preparation for an approval process of domestic commercial operations, process in international markets, product development orders and deliveries for nonpassenger such as logistics, firefighting and aerial media, as well as continued improvements in operating efficiency and our cash position.

Going forward, we will stay focused on driving commercialization and core tech development while continuing to improve operating efficiency and resource allocation. We believe these efforts will strengthen our foundation for long-term growth and create sustainable value for our shareholders. Thank you all.

[Operator Instructions] Your first question comes from Tim Hsiao with Morgan Stanley.

This is Tim from Morgan Stanley. I have 2 questions about commercialization. The first question is, as we just discussed, I think the company target to get a commercial operation permit in Thailand this year. So I just wanted to get more details when do you think that would happen? Like in third quarter? In fourth quarter? And if it happens, how many units of 216 do you think we can -- we are going to ship this year based on the contract? So that's my first question.

My second question is about the commercialization in China. Although, I think, management just mentioned, we are not going to provide updated guidance and attributable to the uncertainty to the incidents that took place in June. But as we remember, the incident was caused by human factors. And if there is any potential barrier, as we discussed with the management, I think previously, management believed that that's with favor Ehang because Ehang's drone products are designed to follow the scheduled route and would fly autonomously and can be under system control. So just wondering what really changed management's view on the impact to the OC's schedule. Just what happened over the past few months? Yes, those are my 2 questions.

[Interpreted] Let me take your first question. We are deploying both passenger carrying and nonpassenger carrying operations in Thailand in parallel. On the passenger carrying side, we have further clarified the approval pathway for flight qualifications with the Thailand Civil Aviation Authority. And we expected to obtain an experimental flying permit in Q3. And we also expected to secure a formal commercial operation certificate by the end of the year. By then, we'll start.

So by that milestone, it represents that our eVTOL will be officially registered within the Thailand's Civil Aviation Authority, though we may not be able to directly sell tickets to the public, but that is indeed a milestone that we are hoping to achieve within the year.

[Interpreted] So we are striving to secure the operational certificate in Thailand by the end of the year. And we are working with the local civil aviation regulator to plan 10 routes. That will cover Bangkok, Phuket, Samui Island and Pattaya. Official deliveries of our EH216 models will start sometime next year. According to the plans, each location will require at least 5 units of EH216-S. So we are going to see a significant increase in our eVTOL deliveries next year.

On the nonpassenger side, the company has shipped over 1,000 GD4 formation drones by sea to the Thai market. And we plan to launch regular drone light show operations in Bangkok and Pattaya.

[Interpreted] The incident you -- regarding the impact of the June flight incident, the incident you mentioned, manned light-sport aircraft incident -- accident in China at the end of June was indeed primarily caused by human factors. The subsequent regulatory tightening has been noticeable, particularly around manned aircraft and their pilot. We continue to hold our original view. Our unmanned, preprogrammed, fixed-route, fleet-oriented, coordinated operating model has inherent safety advantage. And stricter safety regulation is a net positive for us in the long run.

[Interpreted] Regarding the change in our outlook on the OC, Operator Certificate time line, however, the regulatory response has been far -- more far-reaching than we initially anticipated. This incident has prompted the regulators to adopt a more cautious stance toward the entire low altitude industry. Although it is not directly related to our unmanned eVTOLs, the overall cautious regulatory environment has indeed slowed the approval time line for domestic carrying commercial operations, specifically the commercial operation approval process for the Hefei project has been delayed. And the timing of regulatory clearance remains uncertain.

[Interpreted] So our assessment is that the actual regulatory tightening and the enforcement level -- and this is not a rejection of our technology pathway, but rather a periodic, temporary impact on the approval cadence across the industry. We respect and understand the regulators' strong commitment to public safety. And hope -- at the same time, we hope that the regulators would provide reasonable policies while ensuring safety. And for us, we're going to focus on executing what can be done from our side. In the meantime, we are proactively pursuing our global overseas initiatives so that we can move the industry forward.

[Interpreted] Just a quick add. We are working with the local civil aviation authorities to clarify validation pathways and shorten the time from validation to market access through our overseas Fast Track Program.

Your next question comes from [ Wei Gu ] with Jefferies.

From Jefferies. Two questions, please. The first one being, given the full year guidance on the revenue has been withdrawn, and I understand it could be difficult to quantify, but do you mind give us a little bit color on the kind of like the second half run rate versus the 2Q kind of numbers? It would be great if you kind of split it out between eVTOL and the nonpassenger segment.

And my second question will be coming towards the accounting adjustment that we mentioned in the 1Q call. So do you mind give us some sense on the numbers being delivered in this second half -- second Q? And any more to be delivered down the line?

Can you repeat the second question? I didn't quite -- okay, got it.

[Interpreted] Given the uncertainties, the company has decided not to update its full year 2026 revenue guidance at this time, and nor do we -- nor will we provide any specific quantitative expectations on the revenue mix between passenger carrying and nonpassenger business. However, based on the actual operating data that has already been achieved, air mobility revenue accounted for around 92% of our Q2 revenue, while nonpassenger business, primarily GD4 formation drone performance accounted for approximately 8%.

[Interpreted] Nonpassenger revenue is expected to trend upward, both in percentage as a share of the total revenue as well as the absolute amount in the second half of the year, driven mainly by increased deliveries of formation drones as well as a number -- a small number of other model deliveries such as firefighting series.

Passenger business revenue will continue to dominate largely depending on the pace of commercial operation launches on passenger routes in Guangzhou and Hefei as well as the overseas market expansion. The company will continue advance both passenger commercial operations and nonpassenger use case expansion in parallel, with a specific revenue mix evolving dynamically as each business line progresses.

[Interpreted] In the second quarter, the company recognized revenue for a portion of the EH216 series aircraft that had been previously delivered. And going forward, we will recognize revenue as the contracts meet the certain criteria according to applicable accounting policies, and that the company will disclose them to the market in a timely fashion.

Your next question comes from Laura Li with Deutsche Bank.

So 2 follow-ups on the topics that you mentioned before. So firstly, on the regulation side, I think you mentioned a certain level of cautiousness. But just trying to see like for this current regulatory sentiment, what kind of safety evidence or milestones will likely be needed for this approval phase to normalize?

And my second question around the diversification of your revenue stream. So could you update us on the progress across the non-passenger businesses like the logistics or firefighting streams like which area is more promising in the near term or any contract program you're pursuing? Yes, that's my 2 questions.

[Interpreted] Now let me take your questions. First, the review and approvals are conducted with a strong emphasis on ensuring safety. So there are still ongoing reviews. It doesn't mean that the review and approvals have completely come to a grinding halt because you know the low-altitude economy represents a worldwide trend.

And with regard to operations, we are still advancing our operation capabilities. And the operational model will still need to be reviewed and approved. And for approval to become normalized, our operational model needs to pass regulatory review and enter regulatory operations.

[Interpreted] I think to see a full-scale back-to-normal review and approval condition, we need to see that the trial operations that we have in Hefei moving into routine operations. And then we will establish this routine operation, this site as a role model for other operators, even industry benchmark.

So currently, we are helping our customers, putting together related documents and et cetera. As regulatory clearance clears its way and the industry goes back to its normal cadence of review and approval, then our customers will be able to expedite their approval process and move into routine operations.

[Interpreted] Well, there is clear and genuine demand across all of these areas, and EHang has a deep tech reserve, and we are reusing some of our technologies from the human-carrying products onto the nonhuman-carrying products. And to give you some examples, there are some short-range emergency logistics and long-range logistics and et cetera. And those are some of the critical use cases where we can use our products.

And looking into the second half of the year, we are also going to ship firefighting products. And there is quite a very -- quite promising prospects for the orders of these products.

[Interpreted] And this is exactly where our strategy is. This year, we're going to continue to focus on diversifying use cases, particularly in terms of the revenue mix. As you've already seen, nonpassenger business has already reached 8% of the total revenue. And we expect this to further expand and the share to continue to grow as our business progresses. Thank you.

Thank you all. Given the time is limited, let me turn the call back to Ms. Anne for closing remarks.

[Interpreted] Thank you once again for joining us today. If you have any further questions, you can reach out to us through the e-mail on our IR website. Additionally, we are going to host some offline sessions where we are going to have more in-depth communications with you.

We look forward to seeing you in our next earnings call. Thank you, once again. Bye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang First Quarter 2026 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 purposes only. In case of any discrepancy, the management statement in the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions 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 first quarter of 2026. The earnings release is available on the company's IR website. Please note that 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 Chief Executive Officer; Mr. Shuai Feng, Chief Technology Officer, Mr. Zhao Wang, Chief Operating Officer; Ms. Li Xiaona, China General Manager; 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 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 first quarter of 2026, unless stated otherwise. With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu. Thank you.

[Interpreted] Hello, everyone, and thank you for joining our earnings call. In the first quarter of 2026, EHang is navigating a critical transition from certification to commercial operation. We are fully committed to launching the world's first pilot-less human carrying eVTOL into commercial service.

Today, I'd like to share updates from two perspectives, the fundamental shift in regulatory environment and progress on our four core strategies.

First, policy and industry developments. The biggest change in Q1 was institutional. The low-altitude economy now has a solid legal foundation and policy anchor we're moving from the policy concept stage to one truly governed by law. On the legal front, the newly revised Civil Aviation law was passed in January and will take effect on July 1. And formally recognizing the low-altitude economy for the first time.

On the regulatory front, the CAAC has established a new low-altitude safety bureau while the NDRC and CAAC have formed a 2-tier governance model with the NDRC providing top-level coordination and the CAAC handling industry-specific implementation.

Separately, China's State Administration for Market Regulation together with 10 government departments in China have jointly issued the low-altitude economy standard system development guide aiming to establish a basic standard system by 2027.

Some worry that more regulations may slow the industry down. I believe the opposite, this is a positive development, a clear regulatory and standard framework helps everyone in the industry move faster and more properly. As a pioneer, EHang is turning our certification and talent development know-how into building blocks for industry standards. These first-mover advantages not only contribute to industry development, but also strengthen our long-term competitive moat.

Meanwhile, state-owned enterprises and local governments are accelerating their deployment low-altitude economy has been featured in the government work report for 3 consecutive years and is now designated as one of the six emerging strategic pillar industries under China's 15th 5-year plan. More cities are actively planning aerospace, building vertiports and rolling out subsidy programs. And the altitude industry ecosystem is accelerating toward maturity.

Now let me turn to progress on our for core strategies for this year. Routine, commercial operations, global expansion, VT35 certification and industrial chain integration. First, routine and scale to commercial operations remain our top priority.

We have cleared a certification hurdle and are now fully focused on the commercial operation hurdle we have obtained TC, PC and AC and our two operators holds OCs. Over the past year, we have continued to refine the entire operational chain, ticketing insurance, aerospace, approval, maintenance, charging infrastructure, crew training and command and control systems to launch the world's first commercial pilot-less human-carrying eVTOL service. We are now working closely with the regulator to fine-tune our operational capabilities and make the final push from internal trial operations to public ticketed service. That day will not be far away.

The market demand is real. Take our RMB 299 experienced ticket as an example. We continue to receive a large volume of inquiries asking when can I buy a ticket and take a flight. This reflects a strong public enthusiasm for eVTOL commercial flights.

Importantly, our operational capabilities extend beyond passenger vehicles. Our formation drone fleet has use of proven experience in February, our new GD 4.0 drones completed 22,580 units of formation flights, setting a Guinness World Record.

In Q1, the proportion of revenue from the aerial media solution increased noticeably. The experience processes and teams, we have built through these large-scale, highly reliable unmanned aircraft operations will directly benefit EH 216 commercialization.

As the same goes, the last leg of the journey marks the halfway point. Obtaining the 4 certificates was only the first half the real second half is the commercial operation. In the global eVTOL industry, EHang remains the only company with TC, PC, AC and the license for commercial operations. The first-mover advantage here is not a short sprint nor a manufacturing race.

It is an operational race who can run a safe, sustainable commercial model. Second, deepening our global footprint. We are making steady progress overseas. The Thailand AAM Sandbox program continues with the routine validation flights to address hard weather conditions, we completed a battery cooling vehicle testing in Thailand and Guangzhou this month. Adding independent quoting systems that significantly improved charging efficiency in a passenger comfort.

We are also actively working with Civil Aviation Authority of Thailand to issue EH216-S first overseas operating license. Our experience in Thailand Sandbox has become an important reference for our global expansion.

Third, accelerating VT35 certification and commercialization. Certification for VT35, our new longer-range pilotless human-carrying eVTOL is progressing steadily. In Q1, we completed multiple system functions and flight performance tests and held in-depth discussions with the CAAC on certification basis, our VT35 was for future intercity and regional air mobility enriching our product portfolio. At the same time, we are developing non-human-carrying models, including fire fighting and logistics for more application scenarios to further expand our addressable market.

Fourth, strengthening industrial chain integration. We are turning our first-mover certification and ecosystem experience into industry consensus. EHang is not only China's leader in pilotless human-carrying eVTOL certification, but also the earliest practitioner and contributor to national and industry standards for unmanned aircraft in China.

As the world's first mover about to enter routine commercial operation, we are taking steady steps to strengthen our operational capabilities and build a compliance mode. And at the same time, we are integrating R&D, manufacturing, supply chain and quality systems to improve and an efficiency and scale delivered capabilities.

In closing, I want to reiterate the low-altitude economy is a long-term strategic arena with the deep potential. EHang will never lose sight of safety, compliance and operational quality. We're committed to being long-term players who shape eVTOL industry standards with craftsmanship so that China developed in China operated pilots eVTOL will continue to lead the global low-altitude mobility market. I will now turn the call over to our CTO, Shuai Feng. Thank you.

[Interpreted] Thank you, Mr. Hu. Hello, everyone. Hi, I'm Shuai Feng. In Q1 2026, our work focused on three priorities: product R&D and upgrades, certification progress and commercial operation support.

On one hand, we accelerated VT35 development and certification. On the other, we continue to optimize the EH216-S performance operational efficiency and passenger experience to support upcoming operations, strengthening the foundation for scale deployment.

Number one, VT35 progress. VT35 R&D and certification progressed steadily in Q1. The program has now entered a certification basis definition stage where we are working closely with the CAAC to establish the safety evaluation framework. We're engaged in in-depth discussions on special conditions, safety objectives and performance requirements.

On the engineering side, critical ground and flight tests are advancing as planned to validate system functionality, flood performance and safety redundancy. Meanwhile, the VT35 avionics system has entered a detailed design stage, preparing for certification prototype manufacturing and conformity verification.

Building on the EH216-S certification experience and our eVTOL technical expertise we are advancing VT35 efficiently, laying the groundwork for future intercity and regional air mobility.

Number two, EH216-S performance upgrade. This quarter, we focus on hot weather operational efficiency and passenger experience through targeted upgrades to better thermal management and cap and comfort systems.

On operational efficiency to address battery thermal management challenges during high-frequency takeoffs and landings, we developed a dedicated battery cooling vehicle. It has completed production testing and is undergoing further optimization. The cooling vehicle significantly shortens battery cooldown time from high temperatures to safe operating levels, increasing daily charging cycles and flight volume.

In field tests, the cooling vehicle doubled EH216-S utilization, directly supporting higher frequency commercial flights. The unit can be quickly deployed across operational sites, providing flexible and reliable thermal management for large-scale high-density operations.

On passenger experience, we upgraded the cabin air conditioning system. The new independent and cooling system is separate from flight control and AvNOx circuits. So it doesn't interfere with the critical functions while improving comfort in tests, the system quickly reduces cabin temperature after prolonged sun exposure and maintains a comfortable level throughout the flight. This upgrade directly addresses a key pain point in hot climates, improving passenger experience, commercial reputation and market acceptance.

Number three, digital infrastructure for low-altitude operations. Our Guangzhou Command and Control Center is now fully operational, supporting passenger, firefighting, logistics and formation drones. It provides integrated capabilities, including aerospace management, flight planning, dispatch approval, real-time monitoring, operation records and risk alerts.

In Hefei, the command and control system has been deployed and is connected to the city's low-altitude sensing network and EHang's operational data. Together, these platforms establish a solid foundation for regional scaled, low-altitude operations management.

Number four, new product development. We are also actively advancing the R&D and fly testing of new products, including logistics and firefighting aircraft further expanding our product portfolio and low-altitude economy applications. Under our CEO, Mr. Hu's leadership, I will continue to lead our team in advancing product iteration with aviation grade standards, translating technological progress into commercial value efficiently and providing a strong foundation for EHang's long-term growth.

I will now turn the call over to our COO, Zhao Wang, for sales and operations update. Thank you.

[Interpreted] thank you, Mr. Feng. Hello, everyone. I am Zhao Wang. As EHang enters a new phase of commercial operations, I want to introduce a new member of our management team, Ms. Li Xiaona, formerly our Vice President and General Manager of East China has been promoted to China General Manager, she will lead our sales, operations and marketing teams overseeing business development and operations management in both China and overseas markets.

Over the years, Li Xiaona has led our East China team to build our presence in Hefei from the ground up. She established Hefei aviation secured its operator certificate built a highly effective operational system and team with strategic industrial layout covering R&D, manufacturing and commercial operations and delivered outstanding results. I look forward to seeing the Hefei model scale further under her leadership.

Now let me walk you through our Q1 business results and strategic plans. In Q1 2026, we achieved revenues of RMB 25.7 million. We delivered four units of the EH216-S and 1,000 units of the GD 4.0 formation drones and completed 22 drone formation performances.

The year-over-year and sequential decline in eVTOL deliveries was mainly due to the seasonal impact of the Chinese New Year holiday and customer delivery timing.

Look at our revenue mix, our Aerial Media business grew faster and contributed approximately 40% of the total revenue in Q1. The parallel development of our multiple business lines is driving revenue diversification, reflecting continued demand growth across low-altitude application scenarios.

Looking ahead to the full year, we remain confident in our 2026 revenue target of RMB 600 million. This will be supported by the progress we have made on three strategic initiatives. First, diversified revenue streams beyond passenger eVTOL sales and operations, our non-human-carrying businesses, including Aerial Media, firefighting solution and command and control systems are expected to become new growth drivers. Second, continued overseas expansion.

We expect to replicate our overseas model that combines regulatory sandbox program, local partners and our integrated operational capabilities to drive sales and operations in Thailand and other global markets.

Third, advancing domestic commercial operations, Preparation for EH216-S commercial operations have entered the its final stage. We're working with the CAAC on the last mile of commercial operation. We'll continue to prioritize both sales and operations, ensuring steady and compliant commercialization progress. I will now turn the call over to Li Xiaona for a detailed review of our Q1 execution. Thank you.

[Interpreted] Thank you, Mr. Wang. Hello, everyone. I'm Li Xiaona. I'm pleased to join the earnings call for the first time. Let me walk you through our Q1 results, operational strategy and future plans.

In February, we featured 16 EH216-S aircraft and 22,580 GD 4.0 formation drones and the CMG 2026 Spring Festival Gala Hefei have segment.

We completed a flawless performance and set a new Guinness World Record. This appearance significantly enhanced our brand awareness and industry visibility helped to intoduce the concept of low-altitude mobility to a broad public audience and demonstrated our leadership in fleet flight, remote dispatch and communication integration strengthening our brand foundation for commercial partnerships and market expansion both at home and abroad.

As of May 2026, the EH216-S Series has accumulated over 90,000 safe flight globally in 21 countries. This long-term stable, safe track record is our core competitive advantage in global market expansion. Overseas, we have achieved multiple milestones completed first human-carrying flight in Mexico, Latin America and trial flight permits in Thailand, Japan, South Korea and Middle East and Spain.

On overseas strategy, we made a strategic adjustment this year, making VTC our top priority to fully open the commercial pathway in overseas markets. Given how civil aviation regulations work, we plan to leverage China's existing bilateral air worthiness agreements with 32 countries for our certification applications.

Thailand is our first flagship overseas market. Five vertiport locations have been identified and the first route survey has been completed. We have adapted our hardware, including batteries and outboard air conditioning for hot and humid tropical environment and are pushing hard on commercial operation permit progress. We have formed a dedicated overseas team integrating R&D, commercial airworthiness and communications functions.

Going forward, we will systematically map out our bilateral civil aviation policies globally and develop differentiated overseas deployment plans for human-carrying and cargo aircraft, targeting key markets one by one.

On domestic human-carrying air mobility network continues to expand. To date, our customers have built over 40 eVTOL operational sites across China, some of which are already in routine operation. This year, we are shifting our business focus to high-demand tourism scenarios using light asset models such as equipment leasing joint operations and direct sales to lower the barrier for partners while putting existing aircraft to fly.

We are prioritizing locations with high foot traffic and natural commercial appeal, such as Daoli, [Wencheng] and Taishan, running small-scale trials to accumulate safety data then progressively helping customers apply for operator certification.

To improve project executing efficiency, we have set up a dedicated sales support team that works alongside frontline teams, to develop customized integrated operation plans based on local aerospace conditions, tourism resources and the commercial landscape.

On commercial operation preparation, the CAAC has raised the requirement for the world's first pilotless human-carrying eVTOL commercial operation with higher and more detailed standards. At this stage, our two OC certified operators in Hefei and Guangzhou continue to refine their operations systems ground support, crew training and emergency procedures while running internal trial operations routinely and accumulating flying data and service experience.

Since obtaining their OCs in March 2025, both operators have maintained a perfect safe record, 0 accidents and 0 violations.

As domestic benchmarks, EHang General Aviation and Hawaii Aviation have completed over 3,000 of EH216-S flights. We have built a complete end-to-end service system covering ticket pricing, online and off-line ticketing channels, customer service and complaints handling. Service capacity is being expanded in phases.

Going forward, we'll continue to refine our standardized SOPs for passenger services, ticketing management and vertiport operations and then exported these proven models. Crew training progress is on track. We have completed internal structure training for the EH216-S model and submitted all required materials. The plan has been reviewed by the Central and Southern Regional Administration of the CAAC and once formally approved by the CAAC, officer training will begin.

After internal instructor training wraps up in late June, we'll begin full scale crew training.

Our non-human-carrying business is an important second growth driver. We focus on two areas: firefighting and inland waterway logistics. On firefighting side, based on real-world operational scenarios, we have identified a clear product iteration directions. R&D of the new firefighting aircraft is on schedule, and will be formally launched to the market upon product validation, together with supporting maintenance and training systems.

In the second half of the year, we'll showcase product performance through firefighting drills at various levels. while actively working to get our products included fire equipment procurement catalogs, tapping into the emergency response market.

On inland waterway logistics side, we have completed site selection for test routes at Guangzhou Port and the Pearl River main channel. The project will be rolled out in phases near term, continued test flights and routine safety reviews, medium-term routine delivery services on the Pearl River and expansion of our new application scenarios. Long term, replication of the proven model, application for government of funding and building a benchmark inland waterway low-altitude of logistics project in China.

On formation drone performances, the industry is seeing increasingly intense low price competition. We are avoiding price competition and have set a clear strategy to build benchmark projects, replicate profitable models and expand both domestically and overseas.

In overseas markets, we are simultaneously rolling out formation products, leveraging local tourism resources to create routine performance venues that complement our human-carrying business.

Going forward, I'll lead the sales, marketing and operations team to execute our strategic plan steadily with the dedication, efficiency and compliance with safety as the first priority. I will now turn the call over to our CFO, Conor Yang.

Thank you.

Hello, everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR side.

Now let me walk you through the key financial data. In Q1 2026, revenues were RMB 25.7 million, on par with RMB 26.1 million in Q1 2025 but down from RMB 177.6 million in Q4 2025. The decline was mainly due to lower eVTOL deliveries, partly offset by growth from our non-human-carrying business.

During the quarter, we delivered four units of the EH216 series compared to 11 units in Q1 2025 and 61 units of EH216 series plus five units of VT35 in Q4 2025. The lower deliveries were primarily due to seasonal factors at the beginning of the year and the customer delivery schedules.

On a positive note, our revenue mix continues to diversify, benefiting from increased brand visibility and growing market demand, our aerial media business grew faster and contributed approximately 40% of the total revenue in Q1, highlighting the synergies across our diversified business lines.

Gross margin in Q1 was 62.5%, and stable compared to 62.4% in Q1 2025 and up slightly from 61.6% in Q4 2025. Our consistently strong margin profile reflects continued improvement in manufacturing efficiency and supply chain management.

Turning to operating expenses. Adjusted operating expenses defined as total operating expenses, excluding share-based compensation, were RMB 101.1 million in Q1, up 59% from RMB 63.6 million in Q1 2025 and up 7.9% from RMB 93.7 million in Q4 2025. The increase was driven by our continued commercialization efforts, R&D team expansion and increased technology investment.

As our business scales, we have strengthened our operational R&D and global expansion teams while continuing to invest in EH216 series upgrade, VT35 development and future generation of products and core technologies to enrich our product pipeline and reinforce our long-term competitive advantages.

As we continue to invest for future growth, our near-term profitability was impacted by lower revenue scale and higher R&D expenditure. Adjusted operating loss in Q1 was RMB 77.1 million compared to RMB 42.6 million in Q1 2025. Adjusted net loss was RMB 75.6 million compared to RMB 31.1 million in Q1 2025.

As of March 31, 2026, our combined cash and cash equivalents restricted to short-term deposits and short-term and treasury investment totaled RMB 1.03 billion. This healthy cash position provides a solid support for the continued execution of our commercialization strategy global expansion plans and technology development programs.

While near-term financial performance was impacted by delivery timing and strategic investments, we remain committed to a long-term growth strategy and maintain our 2026 annual revenue guidance of RMB 600 million. Our confidence is supported by our diversified revenue mix, continued global market of progress, including the commercial breakthrough in Thailand, and the advancement of EH216-S commercial operations in China.

Meanwhile, we remain focused on improving our operational efficiency and capital allocation as we scale our business. We believe these efforts will strengthen our foundation for long-term growth and create sustainable value for our shareholders.

Based on our confidence in the company's future inhaled cash position, our Board of Directors has approved a share repurchase program. Over the next 12 months, the company may repurchase up to USD 30 million worth of its ADS. Repurchases will be funded from existing cash reserves and management will execute them flexibly based on market conditions. This initiative reflects our commitment to returning value to shareholders and demonstrating our long-term confidence. Thank you all.

[Operator Instructions]

Your first question comes from Pei-Chi Wang with MS.

I have two questions for the first quarter results. I think first, I think most investors are curious about what is the expected revenue mix for remaining 3 quarters of 2026 because we have been exploring more revenue streams from products outside of eVTOL. So the management can give more color on the revenue mix in the following quarters? So this is my first question.

And the second question is about the overseas business. So how should we look at the contribution on the overseas market in the coming months?

[Foreign Language]

[Interpreted] Hello, Okay. Now I'll provide a translation for Conor. So the key strategy for the company is to execute revenue diversification strategy and the results have been shown in our Q1 results. And we have our projects both at home and overseas for our human-carrying business as well as our GD4 aerial business. The projects are scattered across both China and overseas.

Some of them are -- some more the typical examples of projects in [ Changsha ], Xiamen and an overseas example would be Thailand, and we are going to increase the number of performances for the GD4 drone performances in the upcoming 2 quarters. We are also advancing the R&D for our logistics and firefighting models, and they will be rolled out to the market later this year.

In terms of the revenue mix breakdown for our human-carrying business, roughly -- specifically speaking, that will be revenue contributed by the sales and deliveries of EH216-S and the VT35. Together, they will contribute 60% of our revenue for non-human-carrying businesses, they are going to contribute roughly 40% of our revenue.

And now moving on to the second question. The proportion of the overseas revenue will increase significantly. We have made obtaining overseas VTCs (i.e., Validation of Type Certificates), , our top priority this year, relying on bilateral agreement channels and have established a dedicated team pioneer projects in Thailand and Mexico are progressing smoothly. In the medium to long term, overseas markets are expected to continuously contribute to revenue. Thank you.

Your next question comes from Shen Wei with UBS.

[Foreign Language]

[Interpreted] My first question is on the gross profit margin. As you can see, it stayed elevated in Q1. And I also noticed that 40% of the revenue from Q1 was contributed by media business or non-human-carrying related services. I was wondering what's the gross profit margin for this segment? And what is the market and competition outlook is like for this segment?

My second question is on your overseas business. As we have heard from management, the orders -- potential orders from overseas markets was around 100 units. I was wondering if there is any update to this number. And if you can, please also provide a time line on that. Thank you.

[Foreign Language]

[Interpreted] On the gross profit margin, the gross profit margin is -- so that specifically means the proper margin of sales and performance of the flight performance of the GD 4.0. That is around 50%. And for our human-caring-business, that's contributing a higher and higher profit margin this year. Therefore, we are seeing the overall mix staying above 60% for the first quarter. And we also keep that as our full year target. So that's on the gross profit margin.

[Foreign Language]

[Interpreted] And with your question on the overseas orders, we are expecting the revenue contribution to rise up to 10% of the overall revenue. However, this specific contribution is closely tied to our commercial development in Thailand.

We have been spending every effort in our communication with the CAAC. Our overall target is to launch the official commercial operation by the end of the year. Before the AAM conference is going to be held in Bangkok in the end of this year. If that -- if the commercial operation could we achieved earlier. We are going to see a higher contribution to the revenue from the overseas market. Thank you.

Your next question comes from Alan Lau with Jefferies.

This is Alan. So I'd like to follow-up on the question regarding to the gross margins. So what are the major cost items for the non-eVTOL business because the margin is 50%. I would like to know what are the key cost of goods sold in that business line?

And the second question is, is there any operation data that management is I can share to investors regarding to the operations in Hefei. Thank you.

[Foreign Language]

Sorry, I want to clarify, my first question is regarding to the non-eVTOL part, the aerial media part, like what are the cost of goods sold in that business?

[Foreign Language]

[Foreign Language]

[Interpreted] Now the sales and the performance is a drone slides is contributing 50% profit margin. And to break it down, majority of the costs for the sales, it comes -- of the drones is, first of all, the drone costs, plus the battery, the costs used occurred in the assembly line. And when it comes to performing the majority cost of that depends on the size as well as the units of the drones to be deployed for the performance. And given that these drones are possessed by the company as the fixed assets, so there is a cost of depreciation plus the cost of sending personnel and staff to operate and fly these trends at different places. So together, these form the costs of the operation and sales.

And now moving on to the non-human-carrying business, specifically, we're talking about the firefighting models. It has a higher well, gross margin. In terms of the cost, 1/3 of it comes from the carbon fiber material used in building the model. Another 1/3 of the cost comes from the powertrain as well as the battery with the remaining 1/3 coming from the components that you used to build the model.

[Foreign Language]

[Interpreted] this is Wang Zhao. I'll take your second question. I know the market is keen on watching the progress of the operation site in Hefei. I would say it is right now in the final stage of official commercial operations.

At the moment, the Hefei and Guangzhou operation sites are currently still in preparation for commercial operations. And given the unique nature of that site being the world's first pilotless human-carrying eVTOL commercial operation project, the CAAC has proposed a higher and stricter operational standards.

And since obtaining the OC in March 2025, we have been maintaining close communications with the CAAC. We are accumulating precious and valuable trial flight data making sure that there is no accidents or no violations of the standards in place.

[Foreign Language]

[Interpreted] To supply some key data since obtaining the OC in March 2025, the two partner or two operational sites have maintained stable operations with a safe flag record of 0 accident and 0 violations, completing over 3,000 flights.

As we have disclosed at the price, early bird price, we set for the Hefei operation side is RMB 299. Currently, there are four units of EH216-S at this site and they are scheduled to fly 14 flights per day related to mini apps for ticket booking is now up and running. We are fully ready for commercial operations. Once we get to the approval from the CAAC we will soon roll out the commercial operation. Thank you.

Your next question comes from Laura Li with Deutsche Bank.

So my first question, could you provide more color on the order intake so far in '26. And? Are the new orders, mainly from like existing customers or that you're seeing demand from new clients as well?

And my second question will be, could you update the expected time line for the operator training, because once your program is approved, like how long it takes to -- like for the first group of the ground crew to complete the training?

[Foreign Language]

[Foreign Language]

[Interpreted] On the revenue question, we remain confident in our full year revenue target of RMB 600 million. Actually, this confidence is based on the diversified revenue structure that achieved in Q1. The predictability of overseas market breakthroughs and domestic commercial operations entering the final sprint phase.

Majority of the orders will be coming in, in the second half of the year. We have many orders moving in parallel, given that a majority of the orders coming from government-related or institutions or enterprises, the overall approval for the budget is primarily ready in the second half of the year. We also have seen a lot of new customers expressing strong interest in purchasing our models, we expect that over 50% of the revenue for this upcoming year is going to come from new customers.

[Foreign Language]

Sorry. [Foreign Language], sorry.

[Foreign Language]

[Interpreted] Let me explain, the crew training usually is break down into three stages. In the very first stage, CAAC has officially stipulated the large-scale civil eVTOL pilot training, our crude training mechanism. And we have deeply involved in this process. We actually submitted all the related documents teaching materials and everything. We also participate in making the related teaching materials and formulating the tests required to test all of the training personnel.

Actually, in May this year, the CAAC has already published formally published the requirements for the civil eVTOL training related standards. And that actually provided a key compliant reference for the whole industry. And we actually -- EHang, has been deeply involved in that process, and we have actually lend our experience to this process, informing the standards.

[Foreign Language]

[Interpreted] And following the formulating these standards is the internal training of the instructors.

This process has kicked off and it's about to wrap up. We have submitted associated plans, which has been reviewed by the CAAC. Right now, this has been progressing quite steadily. We're expecting the training of the instructor program to wrap up by the end of the month.

And the third stage is to kick off the official training of the crew, ground crew and that will expected to start in the following quarters. Once all these stages have completed, EHang we'll be in a good position and ready to launch batch trainings with each training group, we can train 5 to 10 personnel and with multiple classes training groups moving in parallel. By that, time, we will be ready to supply a sufficient number of the qualified ground crew to the market.

Thank you all. Given the time is limited, let me turn the call back to Ms. Anne for closing remarks.

Okay. Thank you, operator, and thank you all for participating in today's call. We understood that there are many analysts and the investors still waiting on the line. But due to the time limit, if you have any further questions, please contact our IR team by e-mail or participating in our following investors through the calendar information provided on our IR site. And we appreciate your interest and look forward to our next earnings call. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang Fourth Quarter and Fiscal Year of 2025 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 purposes only. In case of any discrepancy, the management's statements in the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions. 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.

[Interpreted] 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 the fiscal year of 2025. 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 Chief Executive Officer; Mr. Shuai Feng, Chief Technology 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 these 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 and the fiscal year of 2025, 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 call today. 2025 was a pivotal year for EHang as we strengthened our business foundation and made meaningful progress towards commercialization.

In Q4, we delivered a strong set of results. Quarterly eVTOL sales volume reached 100 units for the first time. Revenues grew significantly both year-over-year and sequentially, and we achieved our first ever quarterly GAAP profitability. For the full year, we delivered 221 units of eVTOL aircraft, setting a new record and successfully meeting our annual revenue guidance. We also achieved non-GAAP profitability for the second consecutive year. These results reflect years of sustained investment and disciplined execution across product innovation, regulatory certification, industrial ecosystem development and market expansion, laying a solid foundation for our commercialization progress in 2026.

I am pleased to announce that the commercial operation of our flagship product, the EH216-S is entering the final count down. Following comprehensive preparation across our commercial operation system, we're about to officially open our commercial flight services to the public. After nearly a year of internal trial operations, we have established standardized procedures across the entire operational chain from route planning and fleet management to boarding services. At the same time, we have optimized our maintenance systems and safety assurance mechanisms while actively supporting the Civil Aviation Administration of China in advancing the training and certification program for our ground operating crew.

Our 2 OC certified operators, EHang General Aviation and Heyi Aviation both plan to begin offering ticketed EH216-S flight services to the public this month and their operational sites in EHang Future City, our new headquarters in Guangzhou and Luogang Park in Hefei. This launch is expected to mark the world's first commercial service of pilotless human-carrying eVTOL aircraft. It also represents the completion of EHang's full life cycle ecosystem from technology development and airworthiness certification to manufacturing and commercial operations. Going forward, we are evolving from being an aircraft manufacturing to a comprehensive provider of integrated advanced air mobility solutions.

2026 marks the first year of China's 15th 5-year plan period. As the national strategic emerging pillar industry, the low altitude economy is embracing unprecedented strategic development opportunities. Supportive policy direction is now shifting from encouraging exploration to systematic advancement with the continued progress in aerospace management reform, airworthiness notification frameworks and infrastructure development. Together, these initiatives are creating a favorable policy environment for industry development.

With that in mind, EHang's core strategy for this year are to move forward with a disciplined execution, strengthening our foundation while steadily advancing commercialization, operational ecosystem development and global expansion.

First, it has been nearly a year since EHang obtained OC for EH216-S. Over the past year, we have been working intensively to expand our customer and partner base. At the same time, we built the operational systems required to support the commercial flights. This year, our top priority is to launch routine and scaled commercial operations of human-carrying eVTOL aircraft to the public, delivering reliable flight services and continuously improving the flight experience. Our goal is to transform scenes in science fiction into everyday reality for people. This is a milestone many people have been waiting for and so have we. But aviation has always been an industry that moves forward with patience and responsibility, especially when safety and human lives are involved.

Second, we'll continue advancing our global expansion strategy. Taking the Thailand AAM Sandbox initiative as an example, we are steadily moving towards a commercial flight operations and established benchmark projects. I'm also pleased to share good news that EHang is expected to obtain the first commercial operation license for pilotless passenger eVTOL aircraft from the Civil Aviation Authority of Thailand, paving the way for regular urban air mobility services in the country.

Third, we'll accelerate the commercialization readiness of the VT35. In 2026, our focus will be on advancing its time certification and conducting extensive flight test in more diverse and complex environments to fully validate its passenger flight capabilities. At the same time, we'll continue improving the performance of the EH216 series and expanding the deployment of nonpassenger products and applications, including firefighting and logistics, further broadening our market reach.

Fourth, we'll further strengthen our end-to-end industrial chain integration capabilities by coordinating our R&D, manufacturing, supply chain and quality management systems. We aim to improve operational efficiency across the entire value chain, reinforce our long-term competitive advantages and contribute to the establishment of industry standards. EHang remains committed to the principles of safety first innovation-driven growth and collaborative development. We will continue advancing our technology and product innovation, expanding multi-scenario commercial operations and establishing AAM operational models in more regions around the world.

At the same time, we're building a comprehensive business model combining technology, R&D, intelligent manufacturing, commercial operation services, infrastructure collaboration and industry education and integration. We believe the low-altitude economy industry will evolve from demonstration programs to scale commercial operations and then to public accessible services. It will become a vital engine for activating 3 dimensional aerospace resources and cultivating new forms of consumption, truly transforming the industrial values into economic and social benefits.

At this important starting point of a pivotal year, our newly appointed Chief Technology Officer, Feng Shuai, is also joining today's earnings call. Under my leadership, he will oversee our technology R&D, supply chain management, manufacturing and quality system development, driving a more integrated end-to-end management approach from technology innovation to product delivery. By strengthening coordination and the integration across the entire industry chain, we believe our innovation capability, product competitiveness and overall execution will continue to improve.

With that, I would like to hand the call over to Feng Shuai. Thank you.

[Interpreted] Thank you, Mr. Hu. Hello, everyone. I'm Feng Shuai, CTO of EHang. It is a great honor to join today's earnings call for the first time. I am pleased to share our progress in 4 key areas during the fourth quarter. R&D, production and manufacturing, quality management and supply chain assurance, which we refer to as the RPQS Center. We'll also briefly outline our priorities for 2026. The RPQS Center is the core engine of our technology and industrial execution. We focus on technology innovation as the foundation, production capacity as the driver, quality control as the bottom line and supply chain as the cornerstone. Together, these capabilities support the development, commercialization and scale delivery of our products.

Let me walk through the key highlights in each area. Starting with R&D. The fourth quarter of 2025 marked a major breakthroughs across our core product. Our flagship passenger carrying aircraft, VT35 completed multiple critical tests, including multicopter protected transition flights and locked-to-prop or fixed-to-wing flights. The aircraft also successfully completed its first public demonstration flight in Hefei after its grand debut in October. During the quarter, we held the first type certification team meeting with the CAAC, marking a key step forward in the airworthiness certification progress. We are currently conducting flight envelope testing and aim to obtain the type certification in China within the next 2 years.

For the nonpassenger business, we are also developing and deploying product and system lines under multiple application scenarios. Our new GD4.0 formation drones set a Guinness World Record with 22,580 units flying simultaneously at the China Spring Festival Gala, significantly announcing our brand visibility and generating strong demand for both drone products and performance services.

In the firefighting aircraft program, we are upgrading the current models while advancing the next-generation R&D to support emergency response scenarios. For logistics, we are accelerating the development and first flight of the VT series lift and cruise cargo aircraft, developing longer endurance aerial logistics applications. At the same time, our proprietary command and control system continues to evolve as a city-level digital infrastructure platform for a low-altitude economy is now being trial operations in Hefei and Guangzhou providing solid tech support for future skilled commercial operations and air traffic management.

On manufacturing, we continue to expand our production capability and enhance the smart manufacturing capabilities during the fourth quarter. The Phase 2 expansion of our Yunfu production facility was successfully completed, bring our total plan annual capacity to 1,000 units of the eVTOL aircraft and components. The automated production lines have entered a trial product to stage and our smart manufacturing systems will further improve production efficiency and supply chain management.

Meanwhile, additional facilities in Hefei, Weihai and Beijing are progressing as planned. Our nationwide manufacturing footprint is steadily taking shape. We follow a manufacturing to order approach, ensuring stable production planning while preparing large-scale deliveries in the future.

On quality control, we maintain strict end-to-end quality control across the entire product life cycle. Throughout 2025, our quality management system delivered strong performance with steady improvements across all key indicators. The post-certification airworthiness review for our PC achieved the third zero defect pass and the EN9100 audit continues to pass.

On supply chain, during the fourth quarter, we further expanded our supplier network and strengthened our supply chain resilience. Our core supplier system remained stable with a 100% on-time delivery rate for key components, fully supporting our production and deliveries. Going forward, we will continue our strategy of maintaining strong partnerships while introducing additional high-quality suppliers. This approach will strengthen our stable and scalable supply chain, providing support for future capacity expansion and new model development. The low altitude economy represents a new frontier for technological industrial innovation, strong R&D and smarter manufacturing capabilities are the foundation of our long-term competitiveness.

As CTO, I'll continue leading the RPQS team to drive technology innovation, advance product development and certification, expand manufacturing capacity and smart production capabilities, maintain strict quality standards and strengthen supply chain resilience. Our goal is to efficiently translate technological innovation into real commercial deployment and provide a solid technical and industrial support for the company's long-term growth.

With that, I'd like to turn the call over to our COO, Mr. Wang Zhao, for our sales and operations update in more detail. Thank you.

[Interpreted] Thank you, Mr. Hu and Mr. Feng. In 2025, we advanced our business across 3 key priorities: safety, operations and commercialization. For the full year, we generated RMB 509 million in revenues and delivered 221 units of eVTOL aircraft, including 215 units of EH216 series and 6 units of VT35 series.

Our Q4 performance reached a new high. We delivered 95 units of EH216 series and 5 units of VT35 series, generating RMB 240 million in revenues. In China, we continue to deepen our presence in key cities and build flagship partnerships. In Hefei, our collaboration with the local government expanded from a single product to a full product portfolio. The corporation now covers multiple applications, including the EH216 series human-carrying and firefighting versions, the VT35 the GD4.0 formation drone. We also continue to strengthen our partnership with Anshun in Guizhou Province and Guizhou Tourism Group. In Q4, 30 units of EH216-S were delivered to the local market, bringing total deliveries to 50 units to this customer, supporting the development of a local low-altitude economy applications.

Building operational capability has been a major strategic focus throughout the year after EHang General Aviation and Heyi Aviation obtained their operator certificate in March 2025, we began to conduct extensive internal testing and operational optimization across the entire service process, from ticket booking and on-site verification to boarding and flight operations to ensure a seamless user experience. At the same time, we have established a comprehensive set of standard operating procedures covering battery charging, maintenance and fault troubleshooting to ensure the continued airworthiness and operational stability of the fleet.

Based on the safety and operational experience we have accumulated, we plan to officially launch commercial operations with the EH216-S in this month. EHang General Aviation and Heyi Aviation will begin selling flight tickets to the public offering EH216-S pilotless aerial sightseeing flights in our headquarters in Guangzhou and Luogang Park in Hefei. The public will be able to book flights through the EHang Trip and the Heyi Aviation mini programs with an early bird discount price of RMB 299 per person. This will be the world's first ticketed commercial service for pilotless human-carrying eVTOL in the urban air mobility industry, transforming the low altitude economy from a concept into a reality that is accessible to the general public.

Over the past year, we have carefully refined every aspect of the operation. Our approach has always been safety first, experience-focused and sustainability driven. Delivering a high-quality flight experience for our passengers in the initial phase is crucial to building public trust and supporting long-term market adoption. Looking ahead, we will leverage the experience from our OC certification and operations to develop a comprehensive operational solution covering vertiport, planning, routes design, ground crew team training and operational system set up. We plan to replicate this model across more locations in China and overseas to support our customers and partners in launching commercial operations.

It is worth noting that we are building a core note for our operational capabilities, a professional talent system. We're actively working with the CAAC on the trial project for the administration of licenses for the ground operating crew of large civil unmanned aerial vehicles. We have completed multiple rounds of validation and refinement of training courses. Recently, the CAAC has expanded the number of special approval license to ground operating crew for us, providing additional talent support for our upcoming commercial operations.

Beyond meeting immediate operational needs, this initiative is helping establish a long-term industry talent training system. Together with the regulator, we are converting our front-line operational experience into standardized training procedures. This helps establish professional standards for a new generation of aviation talent and strengthens the safety foundation of the industry. Over time, this training framework will enable us to support partners and export our operational capabilities as commercial operation expands.

On the international front, the Thailand AAM Sandbox program remains our key focus. Since its launch in October last year, we have completed a series of verification flights and ongoing trial operations. We are now working closely with the Civil Aviation Authority of Thailand to obtain the first commercial operation license under the Sandbox initiative. If approved, this could become the first overseas commercial operation of a pilotless human-carrying eVTOL. The initial Sandbox areas are planned near the IMPACT Challenger International Convention Center in Bangkok, which will also host the ICAO Second Advanced Air Mobility Symposium or AAM 2026. The CAAT and local partners have set a clear goal of operating up to 100 eVTOL aircraft across 20 Sandbox areas by the end of 2026. Our plan is to establish talent as a model for overseas operations and gradually replicate this model in South East Asia and other belt road markets.

Overall, in 2025, we maintained a disciplined approach to growth, focusing on strengthening our product, manufacturing and operational systems under a strict framework of safety and regulatory compliance. We believe that building these foundational capabilities is essential to support sustainable growth and scalable international expansion in the years ahead.

At the same time, the low altitude economy industry is entering an important policy window. China's 15th 5-year plan has elevated the low altitude economy to a level of strategic emerging pillar industry. This signals the transition from early demonstration programs to a new phase of national level industry development. The low altitude economy has also been formally incorporated to the newly amended civil aviation law of China, which took effect in 2026.

Looking ahead to 2026, we believe the company is entering a new stage of development. Over the past several years, we have been systematically building the key capabilities required for the urban air mobility industry, including aircraft R&D, airworthiness certifications, smart manufacturing and commercial operation readiness. As these foundational capabilities continue to mature and integrate, we see 3 important shifts in our business model.

First, our revenue streams will gradually become more diversified. Applications beyond passenger transportation, including logistics, aerial firefighting solutions and command and control systems are progressing steadily and could become additional growth drivers as the market evolves.

Second, we're evolving from an aircraft provider to a one-stop low altitude operation solution provider, leveraging the operational experience of the EHang General Aviation and Heyi Aviation, along with our standardized operating systems, and we will offer integrated solutions to customers. These include aircraft deliveries, vertiport construction, route planning team, buildup and training and operational guidance.

Third, we're establishing a clear pathway for overseas expansion that combines regulatory Sandbox programs, partnerships with local operators and systematic deployment of our technology and operational capabilities. Thailand is the first to market where this model is taking shape, and we expect to gradually expand to other regions, including Southeast Asia, Central Asia and the Middle East as global regulatory framework continue to evolve.

Overall, we remain committed to a strategy of safety first and disciplined execution. For 2026, we are targeting RMB 600 million of annual revenues while continuing to scale the business at a more steady pace. As the industry is still in its early stages, we'll continue to work closely with regulators, partners and local governments to help move the low altitude economy from demonstration programs to a broader commercial adoption, unlocking the long-term potential of urban air mobility as the new form of transportation.

Now I'll turn it over to our CFO, Conor, to walk us through the financial results.

[Interpreted] Hello, everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site.

Now I will present some key financial data. In Q4 2025, the revenues were RMB 243.8 million, up 48.4% year-over-year and 163.6% sequentially. The quarterly increase was primarily driven by higher sales volume of our products, including 95 units of the EH216 series and 5 units of VT35 delivered this quarter. For the full year, the total eVTOL deliveries reached 221 units and revenues totaled RMB 509.5 million, representing 11.7% increase year-over-year, surpassing our annual guidance. This growth reflects the sustained market demand for our products as well as our effective execution and delivery management, customer support and commercial operation readiness.

Gross margin in Q4 was 62.1%, improving from 60.7% in Q4 of 2024 and 60.8% in Q3 of 2025. For the full year of 2025, gross margin was 62%, improving from 61.4% in 2024. As production scale expanded, overall cost efficiency continued to improve. Overall, the company maintained a gross margin above 60%, reflecting our strong product competitiveness, scaling production capability and display cost management in the eVTOL sector.

Turning to operating expenses. In Q4, adjusted operating expenses, defined as operating expenses excluding share-based compensation, were RMB 99.3 million, representing a 26% year-over-year increase from RMB 78.8 million in Q4 2024 and an 11.4% increase from RMB 89.1 million in Q3 2025.

For 2025, adjusted operating expenses were RMB 348.9 million, representing a 20% increase from RMB 290.1 million (sic) [ RMB 290.8 million ] in 2024. The increase in operating expenses was primarily driven by the continued R&D innovation, expansion of our product sales and the company's commercialization efforts. As we scale our business, we have strategically expanded our sales network, strengthen our operations team and added a key R&D talent, while maintaining ongoing investments in the development and iteration of new eVTOL models like VT35 and EH216-F series and et cetera, and related technologies to enrich our product pipeline and lay the groundwork for future revenue streams.

As the company's revenue continues to grow with operating expenses increasing modestly, operating efficiency has been steadily improving, particularly in the fourth quarter where overall profitability saw a significant improvement. In the fourth quarter, we achieved our first quarter of GAAP profitability with net income reaching RMB 10.5 million. Adjusted operating income for the fourth quarter reached RMB 54.3 million, representing a year-over-year increase of 99.5% and a substantial sequential turnaround from a loss. Adjusted net income for the fourth quarter was RMB 71.5 million, up 96.4% year-over-year, also achieving a sequential return to profitability.

On a full year basis, the company recorded a second consecutive year of profitability under non-GAAP measures with adjusted net income of RMB 29.4 million in 2025. This not only underscores that we have captured the right direction for profitable growth, but also demonstrates our ability to translate the operating leverage into sustainable financial returns.

Looking ahead to 2026, the company will continue to advance the commercial operations and sales of the EH216-S, expand its nonpassenger business and further penetration into international markets. Full year total revenues are expected to reach RMB 600 million, representing a year-over-year increase of approximately 18%. As our manufacturing and operational systems continue to mature, overseas Sandbox projects progress, global market expansion accelerates and ongoing investment in next-generation products, the foundation for our long-term growth continues to solidify. This requires us to strike a balance between strategic execution and financial discipline in our resource allocation, ensuring that every investment translates into sustainable long-term value. We will remain committed to controlling risks and enhancing efficiency and make our expansion, solidifying the financial foundation to the next phase of high quality and sustainable growth and delivering long-term and stable value to our shareholders. Thank you.

[Operator Instructions] Your first question comes from Pei-Chi Wang with MS.

This is Pei-Chi from Morgan Stanley. Congratulations on good first quarter results. So I have 2 questions today. First, it's about the license for ground operating crew since we now expect to begin commercial operation in China soon. So could, management team please share some more color on the progress of getting those required license for the crew team?

And the second one is about the project in Thailand. Since we are also close to obtaining license for commercial operation, what is the expected timing of revenue contribution? And how will the volume ramp up going forward? So these are my questions.

[Interpreted] This is Wang Zhao. I will take your first question. As mentioned previously, we are still moving forward with the operator training program. All training materials have been submitted to the CAAC for approval, and several courses have already been authorized. We expect the first class for operators to begin in the first half of the year.

The good news is that to encourage qualified operators to conduct early commercial operations, the authorities have expanded the number of specially authorized operators for EHang. In the short term, we can conduct commercial operations through these operators. In the long term, we will replenish our talent pool through the operator training program. Thank you.

[Interpreted] This is Conor. I will take your second question. Ever since last October, we have been conducting extensive test flights and trial operations in Thailand. The Civil Aviation Authorities of China and Thailand have communicated thoroughly and they have reached a consensus on mutual airworthiness recognition. This work is now nearing completion.

We expected to obtain the first overseas commercial operation license for the EH216-S pilotless eVTOL aircraft following final approval from the Civil Aviation Authority of Thailand. So this would mean that we would truly achieve a normalized urban air mobility services.

With the specific to the commercial operations side, they are still under planning. So it will be through the Sandbox initiative. So once obtaining the Sandbox commercial operation permit, the local customers will start to move forward with the purchase orders and deliveries. So we are expecting that to start in Q2. If the progress goes smoothly, there could be dozens of units for the full year of 2026. Thank you.

Your next question comes from Wei Shen with UBS.

[Interpreted] This is Wei Shen from UBS. Congratulations on strong results. So I've got two questions. One is on the current policy changes in the domestic low altitude industries because we saw more callers mentioning about this industrial sector in the 2 sessions meetings.

And my second question is on the overseas market sales guidance, whether management could share any?

[Interpreted] This is Wang Zhao. I'll take your first question. Generally, we believe the overall macro environment in 2026 will be better than in 2025. As you know, the 15th 5-year plan has lifted the low altitude economy to an emerging pillar industry or strategic pillar industry, and the level of -- or intensity of resource allocation and policy support for this industry will be greatly enhanced in the future. And also the development of the low altitude economy was included in the newly issued civil aviation law, which will take effect this July.

So this means the industry is entering a new stage where it's going to be ruled by law, governed by law and regulations and standard systems at all levels will be gradually established. This is a necessary path for the new aviation industry. For EHang, we are at the forefront of this industry, and we are contributing first-hand experience to the standard construction. And also, we expected the overall market environment to improve.

[Interpreted] This is Conor. I'll take your second question. On the overseas revenue, so the overall revenue guidance for 2026 is RMB 600 million. The overseas revenue in 2025 was in low single digit as a percentage. Looking ahead to this year, as the overseas commercial operations take place in countries like Thailand, the overseas revenue is expected to increase significantly compared to last year. If things progress well, we may expect to see the revenue contribution move into the double digit as a percentage of the overall revenue.

Your next question comes from Laura Li with Deutsche Bank.

So I want to ask about the RMB 600 million revenue guidance. So what are the assumptions underpinning that? Could you talk about diversifying the revenue through different models or the service revenue versus aircraft delivery or the OEM model versus operator model or the overseas market. So how do you see this play out during this and next year?

So Laura Li, right?

Yes.

[Foreign Language].

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[Interpreted] This is Wang Zhao. I'll take your question. Well, in addition to the human-carrying eVTOL business, we will proactively develop the nonpassenger segment this year such as emergency firefighting, logistics, GD4.0 drone formations and command and dispatch systems. You can see that actually, we delivered 8 firefighting aircraft in December 2025. Meanwhile, during the Chinese Spring Festival Gala, our formation performance of 22,580 drones earned EHang a new Guinness World Record and attracted significant attention.

This, like I said, attracted significant attention for EHang, leading to a surge in inquiries for this business. These are all achievements from our diversified aircraft models and nonpassenger business.

With our opening of commercial operations and ticket sales to the public in March, EHang General Aviation will generate some operational service revenue. But of course, the initial contribution to the overall revenue won't be large. But nevertheless, this is a good start. Thank you.

Our next question comes from Fuyin Liang with Bank of America.

I have two questions for the management. The first one is about our commercial operation plan in this month in China. So initially, how do we expect the fleet size of our commercial operation in the 2 cities in China? And given the current fair price, how do we think about the unit economy model? And what's the profit margin of this operation?

[Interpreted] So initially, there will be around 6 to 10 aircrafts, and we will gradually increase the number of eVTOL to be used for the commercial operations. And the early bird ticket price for each passenger is set at RMB 299 per person, which will basically cover the flight costs. With the specific data, I think we'll have to give it a period of time before we can disclose further details to the public.

My second question is about our cost control. EHang had a very good OpEx control in the last quarter in 2025. So what's the reason behind that? Looking at 2026, how do we expect the OpEx and also the OpEx to sales ratio?

[Interpreted] This is Conor. I'll take your second question. Yes, you're right. Overall, the SBC expenses in 2025 were lower in that of 2024. So that resulted in a smaller-than-expected increase in OpEx. Looking ahead to 2026, the year-over-year growth rate for OpEx is expected to be lower than our revenue growth rate. So we are setting our revenue growth year-over-year at 18% -- from 18% and our OpEx is going to be definitely lower than that.

Your next question comes from Alan Lau with Jefferies.

Congratulations for the company for the strong results in 4Q and also achieving commercial operation in March. So my first question is regarding to the strong delivery in fourth quarter. So we saw the company delivered 100 units on a single quarter. So I would like to know who are the major clients contributing to such strong delivery? And do you expect further orders from the same clients?

[Interpreted] This is Wang Zhao. The growth in the Q4 deliveries was primarily the result of the year long marketing efforts in 2025. Many of them were not new Q4 customers. But actually, customers who we have been discussing specific operational plans and scenarios over the previous quarters with. And that finally result in the deliveries.

And like I said, so the engagement with these clients finally lead to the deliveries in Q4. Some of them were repeat customers. And the key contributions come from clients from Hefei, Wencheng, Xiamen, Guizhou, Sichuan and Guangzhou, and we expect some repeat orders or purchases from repeat customers as well in the future.

That's very clear. And then my second question is regarding to the commercial operation in March. So I would like to know some specifics. Firstly, do you have an exact date on when the app will be launched or the public can book their flights in the program? And then is it point A to point A flight and each time, it's 1 or 2 persons can sit?

[Interpreted] Yes, our commercial operations will be launched in March. We haven't yet disclosed the exact date as we are still fine-tuning the booking platform, the mini program. But operational readiness wise, we are ready. And as for the route, it is -- the flight is for tourism purposes, and it's from point A to point B, carrying 1 passenger. We believe this is enough to fulfill the needs of the customer.

Your next question comes from [ Chen Yu ] with Guangfa Securities.

[Interpreted] So my question is on the OC application for the existing customers or clients. So what is the company doing on the company side? And what initiatives or efforts is the company putting in to facilitate the OC application? Are there any time lines that can be shared on the OC application for these existing clients?

And my second question, I'm not sure whether any other analysts have already asked the same question. Are there any updates on the QC or airworthiness application for VT35? What's the current plan? Are there any adjustments, changes or updates on that?

[Interpreted] This is Wang Zhao. I'll take your first question. There will be 2 OC -- sorry, 2 customers that have obtained the OC and their commercial operation will start to accumulate very valuable experience and become a demo of project for the rest of their clients. And we expect the training for the ground crew to begin in the first half of the year. So this will start to build the solid foundation for the expertise that's needed to conduct the commercial operation. And this would also increase the talent pool required to support the commercial operations of other clients.

And particularly, our client from Guizhou has already submitted their materials for the OC. And furthermore, the policy environment is much more favorable compared to that in 2025. And we have done a lot of work, and we are ready. So we believe as we make more progress on these applications, there will be more customers that can apply and obtain their OCs in this upcoming year.

[Interpreted] This is Feng Shuai. I will take your second question on VT35 certification progress. In Q4, our VT35 completed key tests, including multi-rotor protective transition and shut down and locked propeller fixed-wing flights. Additionally, we've also held a first TCT meeting for airworthiness review.

And we are currently conducting flight envelope tests. We are aiming to obtain the type certification in China within 2 years.

Thank you all. Given that time is limited, let me turn the call back to Ms. Anne for closing remarks.

[Foreign Language]

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang Third Quarter 2025 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. To listen to the original remarks by management, please join the Chinese line. Additionally, both Chinese and English lines are open for questions, and today's call is being recorded.

Now I will turn the call over to Anne Ji, EHang Senior Director of Investor Relations. Ms. Anne, please proceed.

Thank you all for joining us on today's conference call to discuss the company's financial results for the third quarter of 2025. 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 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 third quarter of 2025, unless stated otherwise.

With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu.

Hello, everyone, and thank you for joining our call today. In the third quarter of 2025, we continue to advance our business road map in a steady and disciplined manner. We delivered 42 units during this quarter, generating RMB 92.5 million in total revenues. Under our annual strategy of operations-driven sales, we proactively optimized our delivery pace and prioritized resources towards supporting existing customers in building regular operations in order to establish sustainable commercial operating capabilities.

As a result, delivery saw a temporary slowdown, while new orders continue to grow strongly and our order backlog further increased. We believe this strategy will strengthen the foundation for commercial operations and drive EHang's healthier and more sustainable long-term growth. This quarter, we achieved a sustainable progress in product portfolio, product development, industrial deployment and international expansion, laying a solid foundation for the next phase of growth. First, in terms of product portfolio, we continue to expand our product line this year to cover more diverse application scenarios in the low-altitude economy.

In October, we officially launched the VT35, our next-generation long-range lift-and-cruise pilotless human-carrying eVTOL. The VT35 has gone through a long 6-year period from finalization to productization, integrating the advantages of eVTOLs while avoiding shortcomings of products with other configurations, adopting an advanced tandem wing design, the VT35 maintains full aerodynamic efficiency and flight stability while minimizing the overall size of the aircraft. Its design range with a full load is at least 200 kilometers.

This is only our conservative data under the strict conditions. It can cover various medium to long distance scenarios such as cities, islands and mountains areas, greatly expanding the application scope of eVTOLs in intercity and regional transportation. Consistent with our safety first principle, the VT35 adopts fully redundant systems and autonomous obstacle avoidance, ensuring further enhancements in safety and reliability. Meanwhile, the VT35 extensively uses the mature system architecture of the EH216-S, including its command and control system and ground infrastructure such as standardized vertiports and charging platforms.

In the future, this will enable the true realization of intercity door-to-door travel while significantly reducing infrastructure costs and deployment thresholds. We announced the presale price of RMB 6.5 million for the standard version of VT35 in China. Supported by China's strong manufacturing capabilities and new quality productive forces, we believe this compelling pricing advantages will make the VT35 highly competitive in global markets. We have already received purchase orders from customers in Hefei, Zhejiang and Hainan and have started delivery and test flights in the third quarter.

On certification and industrial deployment, the Civil Aviation Administration of China formally accepted the VT35's type certificate application in March of this year, and the certification progress is progressing steadily. We are following the proven certification path of the EH216-S and are fully accelerating the testing and certification efforts of the VT35. Meanwhile, we further deepened our strategic partnership with the Hefei government to establish the VT35 product hub in Hefei.

The Hefei government will provide a comprehensive support totaling RMB 500 million, including purchase orders to build an integrated layout across R&D, manufacturing, airworthiness certification, sales and operations. This partnership meaningfully strengthened our foundation across the entire industry chain. From the product portfolio perspective, the EH216-S focuses on intercity transportation, while the VT35 addresses intercity and regional transportation, covering major metropolitan clusters such as the Yangtze River Delta, the Pearl River Delta in the Beijing-Tianjin-Hebei region, extending the radius of the 1-hour air travel circle to hundreds of kilometers.

Together, the 2 models form an intercity plus intercity product metrics that alleviates and expands EHang's low-attitude mobility network. Separately, we also began mass production and commercial deployment of our self-developed next-generation formation drone, the GD 4.0 in the third quarter. With a single charter flight endurance of up to 45 minutes and the modular box launch design deployment, the lightweight system with high precision positioning enables long-duration, highly stable flights and significantly enhances visual effects and operational efficiency for aerial light shows.

During the 15th national games held in Guangzhou, we deployed more than 11,000 GD 4.0 drones for a night sky performance making our largest formation record to date. We're also advancing development on several next-generation models, including the firefighting variant of the EH216 series, the VT Series logistics aircraft and a 2-trotter configuration to support a broader range of commercial applications. Our joint venture with Changan Automobile -- EHang and Yinghang has been formally established, and we will codesign and develop the next-generation product line, further strengthening industrial synergies and accelerating the diversification of our overall portfolio.

In terms of industrial development, we continue to strengthen our manufacturing system and long-term capacity planning. Our strategic cooperation with the Minth Group deepened further this quarter, leveraging this expertise in lightweight structural components and intelligent cabin system to enhance the core competitiveness of EHang's eVTOL products. Meanwhile, our joint venture with Enpower Yunfu Yinghang has entered a trial production for its Phase 2 project activity in Yunfu production base.

Construction of our facilities in Hefei, Weihai, and Beijing is also progressing as planned, forming a full value chain layout across R&D, manufacturing, airworthiness certification, delivery and operations. As these major industrial bases come online, we expect to further strengthen our production capacity, supply chain resilience and deliver efficiency. Internationally, we continue to advance global deployment in a steady and phased manner, establishing scalable market entry models through demonstration flights and local partnerships.

During the quarter, we achieved notable progress across Asia, the Middle East and Africa, including ongoing trial operations under Thailand's regulatory Sandbox program and completing the Mid East first intra-city pilotless human-carrying eVTOL flight in Qatar, which showcased the efficiency of point-to-point low-attitude transportation. We also carried out consistent demonstration flights and regulatory engagements in Africa and Japan.

These overseas initiatives, the path of flight verification scenario application, commercial operation, laying a solid foundation for future large-scale business expansion. On the policy front, China's 15th 5-year plan proposal released in October explicitly called for accelerating the development of industrial clusters in strategic low-altitude economy, providing long-term stable and high certainty policy expectations for the industry. Ongoing regulatory improvements, aerospace reform, infrastructure build-out and application stars collectively create a comprehensive environment that supports the R&D production testing and operations of eVTOL.

As an industry pioneer, EHang will continue to participate in standards development and demonstration programs, leveraging policy momentum to accelerate the technology deployment and industrial expansion. Guided by national policy support, local governments are increasingly supporting the low-altitude economy, providing more practical operational guidance for the industry. For example, in October, Guangdong province introduced several measures to promote the high-quality development of the low-altitude economy, supporting Guangzhou, Shenzhen and Zhuhai in pioneering intercity and intercity low-altitude passenger routes and promoting cross-border drone logistics in the Greater Bay Area.

Similarly, in September, the Hong Kong government also proposed in its latest policy address to formulate a low-altitude action plan and launched an advanced sandbox pilot. The initiatives cover more complex scenarios, including cross-border flight routes and human-carrying eVTOL operations. We are currently working closely with the Hong Kong regulators to advance pilots initiatives. These policy breakthroughs will not only strengthen the industry's long-term outlook, but also provide a clear institutional guidance for our commercial implementation. We also continued to invest in the broader industrial and research ecosystems.

Following the establishment of the Joint Research Institute with Tsinghua University this quarter, we recently signed a strategic cooperation framework agreement with the China Academy of Civil Aviation Science and Technology. The partnership will focus on 6 major areas, including flight safety, road management, operational support, regulatory standards and technology validation and jointly building a standard system for low-altitude commercial operations. Looking ahead, we will continue to prioritize safety while leveraging our product strength, innovation capabilities and operational expertise as our core drivers.

We will advance commercial operations in a disciplined manner and further deepen our global footprint benefited from an increasingly supportive policy environment, a more complete product portfolio and our continuously strengthened full chain capabilities across R&D, manufacturing, airworthiness certification and operations, we remain confident in our long-term growth outlook. Meanwhile, we're also very pleased to welcome our new Board member, Ms. Haiyan Li to the company's Board of Directors.

With her extensive global experience in capital markets, asset management and corporate strategy, her addition will provide significant support for enhancing the company's international perspective, capital market engagement and strategic decision-making in the future. Her appointment will also strengthen the diversified structure and governance capabilities of our Board. We look forward to working with her to drive the company into its next phase of growth. I will now hand it over to our COO, Wang Zhao, for operational updates this year.

Thank you, Mr. Hu. In Q3, we continued to execute against our core strategy focused on safety, operational excellence and commercial deployment. We generated revenues of RMB 92.5 million and delivered 42 units of eVTOL, including 41 units of EH216 series and the first VT35. Deliveries this quarter were mainly in China, totaling 39 units with overseas customers in Thailand and Malaysia. The quarter-over-quarter and year-over-year declines in revenues and deliveries were mainly due to the delayed payment schedules from certain customers.

While some sales agreements were signed during the third quarter, payments were not completed in time, resulting in a part of the originally planned Q3 deliveries being deferred and therefore, not recognized as Q3 revenue. As of now, 30 units of those orders have been fully paid for and will be recognized in Q4. Based on our current delivery progress and order execution, we are maintaining our full year revenue guidance of RMB 500 million. On operational readiness, we are steadily preparing for the official commercial operations of the EH216 -- S in China.

Our 2 certified operators, EHang General Aviation and Hefei Heyi Aviation continued human-carrying trial operations throughout the third quarter. As of now, in the second half of 2025, a total of 1,147 flight missions have been safely conducted by the 2 certified operators, including 359 human-carrying flights, all demonstrating stable and reliable performance. Hefei Heyi Aviation's operation site is now ready for commercial operations and plan to gradually and carefully open to the public through a reservation system starting in December. This will allow more passengers to experience pilotless eVTOL mobility firsthand.

Meanwhile, preparation for point A to B route trial flights at both sites are progressing well. Route planning, vertiport assessment and aerospace surveys have been completed and multiple rounds of test flights have already been conducted. Leveraging capabilities of both certified operators, we will continue conducting additional human carrying flights and operational trials to advance the rollout of point A to B route operations. Furthermore, we continue to support delivered customers with route flights.

These flights have been carried out across a variety of terrains and environments, including major island in Fujian, Hangzhou, Shanxi, Chongqing, [indiscernible] and Qinhuangdao in Hebei. Through scenario-specific verification and trial operations, we are gradually establishing an operational guide book for different applications and accumulating high-quality data and practical experience for future scale commercial operations. Flight tests in special environments such as plateaus, cold regions and straits are also progressing steadily, further demonstrating the strong flight performance of the EH216.

For external operational support, we have begun delivering or offering services of OC certification assistance and outsourced operation services through EHang General Aviation and Hefei Heyi General Aviation. Several customer projects are already underway. To support future commercial scaling, we are accelerating the deployment -- development of our key capabilities. In Q3, we completed the design of all required materials for the EH216-S ground operator training program, including training plans, flight menus, course outlines, training materials and assessment systems.

The Center South Regional Administration of the CAAC has formally accepted our application and the first training program is expected to begin shortly. The training cycle will run through the end of the year and proceed under CAAC supervision. Our goal is to verify the first batch of ground operators early next year. We plan to build a team of about 100 professional ground operators to support scaled commercial operations and service delivery while also training additional ground operators for our customers' own operating teams.

Once a certain number of certified ground operators are available in the market, regular operations can be realized in various customer operation scenarios and the progress for other operating companies to obtain OC will be further advanced. At the same time, we are making steady progress on developing the EHang Trip ticketing system. The internal testing version is now live, allowing our employees to book and experience flights through the online platform. And the initial feedback has been very positive. This will prepare us for upcoming launch of the public online ticket service.

Internationally, our global visibility and flight footprint continue to expand. To date, the EH216 series had cumulatively completed over 80,000 flights globally, further strengthening its international presence and credibility. In Japan, the EH216S successfully flew near the Osaka Kansai Expo venue and at the Food of Mountain Fuji, while the EH216-L completed first cargo logistics route flight in Ishikawa Prefecture.

In Rwanda, in collaboration with the China Road and Bridge Cooperation, we completed the first humanitarian flight of the EH216-S in Africa, extending our flight footprint to 21 countries. Regarding overseas regulatory certification, we are working with the local partners and civil aviation authorities in multiple countries, including Saudi Arabia, the UAE, Thailand, Brazil and South Africa to advance the establishment of bilateral airworthiness validation with the CAAC and to support the validation of type certificate application for the EH216-S.

Relevant regulatory frameworks in these markets are accelerating and maturing, laying important groundwork for future commercial eVTOL operations. Meanwhile, we are also actively exploring trial-first pathways to initiate operational trials overseas. In October, together with Civil Aviation Authority of Thailand and local partners, we officially launched the Thailand Advanced Aero Mobility Sandbox project. Through flight validation under the Sandbox framework, we were able to obtain special operational approval through an expedited regulatory process.

This initiative represents the world's first regulatory sandbox model for advancing commercial video operations and is expected to become a benchmark program globally. The EH216-S has now undergone over a month of continuous trial operations within the Bangkok Sandbox area, showing strong stability and reliability across all trial flights. We also conducted a series of on-site emergency response demonstrations for CAAT covering scenarios such as a propeller failure, communication loss and other contingency situations to validate the autonomous handling capabilities and safety performance of our pilotless intelligence system.

These efforts not only validate the commercial operational model for eVTOL, but also established a solid foundation for a replicable regulatory and operational framework. Looking ahead, we plan to expand the sandbox to Pattaya, Koh Larn, Phuket, Koh Samui forming a demonstration network covering tourism, commuting and intra-island transport. This will also provide a scalable and replicable pathway for commercial pilot projects across other Southeast Asian markets.

In the Middle East, with operational authorization from the Qatar Civil Aviation Authority and the support from the Ministry of Transport, we successfully completed a series of human-carrying flights with EH216-S in Downtown Doha and the region's first pilotless intercity point-to-point eVTOL flights. The flights connected the Doha Port and the Katara Cultural Village, reducing a 30-minute car ride to just 8 clearly demonstrating the EH216 as its application potential in urban air mobility scenarios.

We will continue deepening cooperation with the Qatar's Ministry of Transport and advance the pilotless air taxi project in a phased manner. In Central Asia, we signed an MOU in September with Allur Group, a major industrial and commercial enterprise in Kazakhstan, outlining a phased procurement plan for 50 units of EH216 Series eVTOL. Together, we will establish the first UAM operation center in Central Asia and plan to build a localized assembly base, further promoting the localized development of the low-altitude economy industrial chain across the region.

The partnership has attracted strong attention from Kazakhstan's first Deputy Prime Minister and the Governor of Karaganda region, we held 2 meetings with the first Deputy Prime Minister in Beijing and Astana, during which EHang was invited to share China's leading operational experience and regulatory best practices to support Kazakhstan in building a compliant and sustainable low-altitude economy. Beyond our human-carrying business and in line with this year's strategic priorities, we are also actively expanding our non-passenger business, including emergency firefighting, logistics, urban inspection and drone light shows.

For emergency response applications, we have developed an integrated system. It links small drones deployed from automated drone ports with our command and control system and specialized firefighting UAVs. This solution enables cities to build a comprehensive rapid response emergency framework. Several municipalities, including Fangshan District in Beijing have already expressed a strong interest in project planning and demonstration drills are underway. EHang was among the first enterprises to conduct drone light shows.

This year, our newly developed GD 4.0 drone also demonstrated a strong performance and high scalability. It successfully completed an 8,000 drone performance for CCTV China Science and Technology Innovation Gala and over 11,000 drones for the national games and has already achieved formations of up to 14,000 drones. Currently, test flights for a 20,000 drone show are in progress, which would surpass the current Guinness world record.

In addition, the GD 4.0 is multifunctional with minor modifications, it can be used for urban inspection and as a key component in building 3D digital twin models and smart city management systems. The strong overall performance of the GD 4.0 positions our aerial media business to shift its focus from primarily providing show performance series to becoming a hardware solution supplier through direct sales of formation drones. To date, the GD 4.0 has secured firm orders for 3,000 units and customer purchase intentions exceeding 10,000 units.

Selling formation drones not only enables us to quickly recover R&D investments and generate product level margins, but also helps us cultivate the drone formation show market and capture greater market share. In addition, it brings recurring revenue opportunities from aircraft maintenance and consumables. This drives a more diversified and resilient revenue structure for the business. Looking ahead, we'll continue to strengthen our overall competitiveness through our diversified product portfolio, modified, low-altitude solutions and solid safety record, improving commercial operation capabilities and our growing global partnership network. These capabilities collectively reinforce the foundation for the company's long-term and sustainable growth.

Now I'll turn it over to our Chief Financial Officer, Conor, to walk us through the financial results.

Hello, everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site. Now I will present some key financial data. Total revenues were RMB 92.5 million in Q3 2025. These year-over-year and sequential decreases are primarily driven by decreased sales volume of EH216 series products.

This was primarily due to the company's strategic focus being adjusted to the various operational preparations before the launch of operations as well as assisting customers in the establishment of operation certificate systems and capabilities which thus affected the short-term delivery. Gross profit was RMB 56.2 million in Q3, showing both year-over-year and sequential decline caused by decreased revenues in the quarter. The gross margin in Q3 was 60.8%, slightly lower than 61.2% in Q3 2024 and 62.6% in Q2 2025.

Despite a slight decline, our gross profit margin remains at a relatively high level, which reflects our competitive advantages in the eVTOL sector. Turning to expenses. Total operating expenses in Q3 were RMB 151 million, which remained basically flat year-over-year and decreased quarter-on-quarter. The quarter-on-quarter decrease was primarily due to significant decreases in sales and marketing expenses. The adjusted operating expenses for the third quarter, which excluded share-based compensation expenses, were RMB 89.1 million, representing a slight year-on-year increase of 2.6% and a quarter-on-quarter decrease of 8%.

This quarter-on-quarter decrease was mainly due to the company's continuous efforts to enhance operational efficiency, which has led to a reduction in various operating expenses. Adjusted net loss was RMB 20.3 million compared with adjusted net income of RMB 15.7 million in the second quarter of 2024 and RMB 9.4 million in the second quarter of 2025. The adjusted net loss was mainly caused by decreased revenue generated in the quarter. In Q3, the company raised USD 10 million through its at-the-market offering program.

The proceeds will mainly be used for the company's research and development of next-generation technologies and products, team and production expansion, establishment of new headquarters, commercial operations, working capital and general corporate purposes. The company continues to have strong capital reserves. As of September 30, 2025, our cash and cash equivalents, restricted short-term deposits and short-term investment totaled RMB 1.13 billion. This solid foundation gives us the flexibility to support future R&D investments, expand our production capacities and grow our commercial operations.

With steady delivery progress for orders in hand in the fourth quarter, we currently remain confident in achieving our full year 2025 revenue guidance of approximately RMB 500 million. Looking ahead, as commercial operations begin to scale and international sandbox projects advance with establishment of scalable operating system and the continued expansion of our global footprint, EHang is rapidly building a robust foundation for sustained long-term growth. We'll continue to pursue healthy, sustainable [Audio Gap].

[Operator Instructions] Your first question comes from Tim Hsiao with Morgan Stanley.

[Foreign Language]

[Interpreted] I am Joey from Morgan Stanley. I would like the management to share more color on the Sandbox initiative. Could you share more from the capital markets perspective in terms of the exact or rough time line that we are currently looking at, particularly on specific crucial stages like OC application, transition from trial operations to official commercial operations. And I've heard that you are currently expanding this Sandbox initiative to 4 regions. And so collectively, what kind of scale are we looking at from this perspective?

And additional separate question is that you are planning to replicate the Sandbox initiative to other Southeast Asian countries. I was wondering, could management share any progress on that front? Are there any engagements that we are having with various countries in that region because we know that eVTOL is a good fit for many of these island countries. So could management share more color on that?

[Foreign Language]

[Interpreted] Thank you for your question. So let me answer this question. Actually, in mid-October, the regulators from Thailand, the civil aviation regulators from Thailand has actually approved that we are -- we conducted AUM, Sandbox initiative in Bangkok. This is from point A to point B Sandbox initiative. So the goal for us is to officially commence eVTOL commercial operations in the next 3 months. So currently, we are still conducting daily tests, and we are submitting these test data to the civil aviation regulator in Thailand.

Actually, just for Monday, the Director General of Thailand's Civil Aviation Authority just took a ride of our eVTOL flying across the city center of Bangkok. This marks the very first of its kind for a Director General of Civil Aviation Regulator to ride on eVTOL. And actually, there is an important industry conference called [indiscernible] that's going to be held in Q4 in 2026. So given this important meeting, the goal for the Director General of the Thailand Civil Aviation regulator is to officially launch commercial operation of eVTOL before the conference took place.

Actually, we just released an interview, which is posted on YouTube and other social media platforms. It's available out there. So it's an interview between the founder of our Thailand operator -- between the founder of Aerial company, which is our Thailand operator. So in the interview, they officially mentioned -- they proposed that they are going to have 20 Sandbox initiatives in -- by the end of 2026. So by then, it's going to be commercial operations where it's going to generate the revenue. So judging by this goal, we are looking at delivery of 100 EH216 units in 2026.

And looking at the overall market, given the islands and also the transportation requirements or needs out there, we are looking at a potential over 1,000 units of EH216, I mean, to be delivered to this market. But of course, we understand that there has been some misunderstanding from some industry analysts recently on our commercialization path. However, I want to assure you that with the preparations we have put in place over the years, we are preparing and we are going to see a breakthrough in EHang's commercial operations, both domestic and overseas.

And with the engagement with other regulators in the Southeast Asian countries. I'm going to tell you that they are progressing well. We are maintaining close communication with them. We are currently engaging the authorities in Cambodia, Malaysia and Singapore. Just to give you an information, so the Director General of the Singapore Civil Aviation also visited and saw the 216 as a demo flight. I personally offered the explanation. So it's a new industry, and it's with new, say, demo projects that we are going to enter into our commercial operation in Thailand, it's going to set up a good role model for the rest of the countries -- surrounding countries in Southeast Asia. So hopefully, that answers your question.

Your next question comes from James [indiscernible] from UBS.

[Foreign Language]

[Interpreted] I was wondering why we're expanding into unmanned product portfolios, for instance, firefighting drones or eVTOL as well as the formation performance drones. What's their contribution to our revenue and also profit. So could management share more on that?

[Foreign Language]

[Interpreted] This is Wang Zhao. Let me take your question. Actually, the low-altitude economy encompass or consists of both manned business and unmanned business. They are both critical components of this economy. With EHang's decade R&D investments, we first set up to pick manned operation as our goal because this is the most challenging sector because it involves flying men from the ground up to the sky. So it poses significant challenges. And over the years, we have accumulated a lot of technologies and patents. So with our capabilities covering various travel distance, various size of the eVTOLs, we are able to tackle all of these problems.

[Foreign Language]

[Interpreted] Actually, for our 216, it's actually a serious product. We have the 216-S, which is for manned transportation, and we have 216-L, which is dedicated for logistics, 216-F dedicated for firefighting and 216-LF dedicated for forest fire extinguishing. And additionally, we just launched VT35 in October. It also has a model dedicated for logistics services and with other application scenarios available. So what we are trying to do is to maximize the technology that we have.

We are going to introduce more models. We are going to expand our product portfolio so as to increase the revenue and try to -- that's our strategy and how we are going about it in the low-altitude economy. Maybe in the past, analysts are not following our unmanned products very closely. So in order to achieve sustainable, healthy development, we need to extend our product portfolio so as to gain more market share. The reason why everyone is focused on the manned eVTOL, that's because it's the most challenging part, and that's the one that we're choosing to focus on first. So hopefully, that's the first bit.

[Foreign Language]

[Interpreted] As our manned eVTOL hub is gradually entering commercial operation, we have been expanding the teams, recruit more personnel and try to extend our unmanned business. What we're trying to do is to build a comprehensive product portfolio, which can generate positive cash flow for the company. As we mentioned at the end of last year as well as earlier this year, what we are trying to do is to adjust the product mix and trying to have a more diversified portfolio. So nevertheless, they all fall under the low-altitude economy umbrella. So they are all going to be the major business for our company. So going forward, you're going to see a much more diversified product mix, which all going to contribute to the company's bottom line.

Your next question comes from [ Chen Yu ] from Guosen Securities.

[Foreign Language]

[Interpreted] I got 2 questions. One is on our VT35. Following the October announcement, we noticed that there is a 1 unit delivery of the VT35 in Q3. I was wondering what the plan is for the airworthiness application as well as type certificate application. And the second question, perhaps I joined the call a little bit late. I'm not sure whether you have touched on that or not. We noticed that the gross profit margin for Q3 declined slightly. I'm not sure whether the gross profit margin will stabilize at around 60%? And what's the cause of the decline for Q3 in gross profit margin?

[Foreign Language]

[Interpreted] This is Wang Zhao. I'll take your first question. Actually, you're right, we debuted the VT35 model on October 13. Actually, we submitted the TC application as early as March this year. And the airworthiness application or review progress is progressing steadily. Maybe you have noticed that we released the VT35 route flight demo at the October press conference. It actually has successfully completed multiple key tests, including the wind tunnel tests, ground load tests, multi-rotor test flights and many other tests.

[Foreign Language]

[Interpreted] And additionally, the design of VT35 incorporates both the multi-propeller as well as fixed wing. It's -- we have accumulated a rich experience in our EH216-S airworthiness review process, and we're going to leverage those learnings. And together with the R&D team as well as the airworthiness application team that we have, it's going to accelerate the IC process. We're pretty confident in that.

[Foreign Language]

[Interpreted] This is Conor. On the gross profit margin, yes, you're right. There is decline slightly. So the causes behind that, for one, there is repeat purchases from some of our existing major customers. That's a good thing. And also, we have made sales to some of the distributors where we offered some discounts. So these 2 are the causes of the decline in the gross profit margin. And with regard to the VT35, we delivered 1 unit this quarter. However, you should know that this model is still in the trial production phase and not be mass produced, that's why the unit cost of this model is relatively high. But we still have a lot of -- we have received secure -- we have secured orders for VT35.

[Foreign Language]

[Interpreted] And over the long term, we are going to expect our gross margin to remain stable at around 60%. But you're going to see the gross profit margin fluctuate slightly as we introduce more products to enrich our product mix, for instance, the unmanned business, such as the drone formation performance, firefighting and the logistic aircraft and et cetera. As that increases, so it's going to make -- fluctuate to the gross revenue margin. But over the long run, 60% of gross profit margin.

Your next question comes from Jason Sun with BDS Bank. Jason, you may ask your question. [Operator Instructions] We'll now pause a moment to allow for any final questions. That is all the time we have for questions this evening. Thank you for participating. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]