Lotus Technology Inc. American Depositary Shares (LOT) Q1 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Lotus Technology Inc. First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Demi Zhang from the company. Please go ahead.

Thank you, operator. Good morning, good afternoon, and good evening, everyone. Thank you for joining Lotus Tech's First Quarter 2025 Earnings Call. This is Demi Zhang, the Head of IR at Lotus Tech. I'm honored to introduce and welcome company management with us today, CEO, Mr. Qingfeng, Feng; and CFO, Dr. Daxue Wang. Before we continue, please be reminded that today's discussion will contain forward-looking statements 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 views expressed today. Further information regarding risks and uncertainties is included in relevant filings of Lotus Tech with the U.S. Securities and Exchange Commission. The company undertakes no obligation to update any forward-looking statements, except as required by law. Please also be noted that our earnings press release and this conference call will include disclosure of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. You can find a reconciliation of these figures in the press release available on our Investor Relations website at ir.group/lotus.com. With that, I'd like to turn the call over to our CFO, Dr. Wang. Dr. Wang, please.

Good day, and good evening. Distinguished shareholders, analysts and members of the press, thank you very much for joining our Q1 2025 earnings release. My name is Daxue Wang, Chief Financial Officer of the Lotus. I'm honored to take this opportunity to brief you on the company's unaudited financial results. In Q1, the company delivered nearly 1,300 vehicles to the distributors, up 42% year-on-year, and user vehicle deliveries exceeded 2,000 units, up by more than 10% year-on-year. These numbers reflect the scheduled transition period if upgraded models started delivery in Q2 related to the effect of the prior destocking activities in the Q4 last year. As you may know, we started revamping our Eletre Hyper SUV and Emeya Hyper-GT line map with upgraded configurations. We kicked off customer delivery on the upgraded models in China during the second quarter and expect to begin deliveries in Europe in the upcoming third quarter. Although the quarterly revenues narrowed to USD 93 million in the first quarter, the company achieved a notable gross margin recovery, improving from the negative Q4 last year to the current 12%, placing us firmly in positive territory as the impact from prior destocking effects eased. Now, I will break down our sales by category and by regions. By category, lifestyle vehicles accounted for 56% of the total Q1 deliveries, consistent with the full year 2024 figures. By region, Europe, China and North America, each contributed approximately 1/3 of the company's total deliveries, while the rest of the world region accounted for the remaining 4%. Regarding our sales channels, the total number and the composition of the sales starts by region remained stable during the first quarter. For the key financial indicators, deliveries, revenue and gross margin, profit margin has just been reported. Cost of revenue decreased by 43% year-on-year to USD 82 million. Consequently, gross profit was USD 11 million. We reported an operating loss of USD 103 million for quarter 1, a 56% year-on-year decrease. The net loss of the quarter was USD 183 million, representing a 29% reduction. For your information, the adjusted net loss under the non-GAAP measures for the quarter was unchanged. But behind these financial numbers, we have to highlight our achievements of reducing operating expenses for 6 consecutive quarters, driven by continued rigorous implementation of efficient enhancement plans. And now I will stop here and hand over to Mr. Feng.

[Interpreted] Hello, my name is Qingfeng, Feng, CEO of Lotus. Allow me to share with you the most recent business progress and the strategies of Lotus. As a premium brand, we highlighted the importance of brand establishment, particularly on Sportscar, and this is something that we have been doing this year on raising track. On May 30, we launched a national-level GT1 main racing series Lotus car in features high ground span in China and Malaysia. We successfully completed the first race in the city of Chengdu. The racing series stands as China's premier FIA-recognized GT Series eligible for international C-license upgrade. Among our customer group of Lotus, they may highlight the vehicle's esthetic styling and the performance of the vehicle, and this is why that this year, we've been spending most of our efforts on the performance side. As ultimate handling and riding iconic features of Lotus, we've been trying to stand out among other premium brands. And this one -- this is also one of the reasons that this year, we are trying to leverage race series to improve our brand awareness. And on May 26, we have also released our 2024 year ESG report, highlighting our progress in advancing sustainable practices, developing innovative green products and demonstrating global leadership in green mobility. Back in 2024, we have launched a new technology called Hyper Hybrid EV Technology. This has gained a lot of interest. And what I can share with you is that the progress of this technology is very good. And later, I will elaborate more on the details. As for our product pipeline and the product planning, our EMIRA model year '26 has already started its delivery in August as the vehicle will commence its delivery in the U.S. In April, we've also started to deliver our Eletre and Emeya model year '26. It has started in China market first and then we are going to commence the delivery in the EU. In recent years, premium brands BEV's penetration is -- does not tell our expectation. However, the interest on PHEV is gaining its momentum. We believe that such a technology of a Hyper Hybrid can supplement the disadvantages of BEV. For customers who like ICE, they can still enjoy the drivetrain. For customers who may fund us for BEV, they can feel free to worry about the range. Our new model is expected to step you at the end of this year and the delivery of this vehicle is expected to happen in quarter 1 next year. And allow me to share with you some of the highlights of this particular model. Performance will still remain our iconic feature for this model, and this vehicle is going to be the world's first mass-produced PHEV, that is performance-oriented. Particularly in the market with the low penetration rate for BEV such as APAC and Middle East, we believe such a hybrid technology could be widely accepted in those markets. And this Hyper Hybrid Technology features a 300 kilometers of range when it is driven by the pure battery, and in high speed, for example, the combined driving range can reach over 1,000 kilometers. In addition to that, it also features a Dual Hyper Charging Technology, Ultra-Fast Plug-In Charging and Ultra-Fast On-The-Drive Charging. On-The-Drive Charging rate is 5x the power consumption of the typical driving scenarios. It can deliver a battery charge from 10% to 80% within 12 minutes, pretty much on par with the battery swap speed. As we are very highlights on the performance side of this vehicle, it can deliver the ultimate performance under any circumstances. Even though the battery may consume to lower than 5%, the performance can still be secured. And this is why that I previously highlighted the features that On-The-Drive charging rate is 5x the power consumption of typical driving scenarios. Again, this both first performance-oriented Hyper SUV is going to debut at the end of this year, and the delivery will start next quarter 1. Our initial target is to deliver a balanced delivery distribution across our markets, 30% in the U.S., 30% in EU, and 30% in China, 1% in rest of the world. Between 2023 and 2025, the main challenges around the U.S. tariff hike, which led us not be able to export many vehicles to the U.S. market. Given that, the current regional share of deliveries since 2024 are as follows: 22% in North America, 38% in Europe, 14% for the rest of the world and 26% for China. And this year, we are expecting the China's contribution is going to be a bit higher compared with the previous year. In the future, we are trying to leverage our U.S. strategy to catch up the losses due to the tariff hike. At this moment, we are discussing with our strategic partners in the U.S. on localization plans in order to avoid the influence of U.S. tariff. With our strategic partners, we had an in-depth discussion around U.S. landscape, and we believe that localization is a feasible plan. We will continue to explore U.S. markets with our PHEV and also BEV products.

Thank you very much, Mr. Feng and Dr. Wang. Due to the time constraints, we will not be holding a Q&A session today. However, we have received a number of questions regarding the progress of our Hyper Hybrid initiatives and our global market strategies. So to address this key topics. I would like to invite Mr. Feng to share more of his insights. Mr. Feng, please.

[Interpreted] For our PHEV products, I'd like to start with our observation regarding the PHEV market is actually growing very fast in both China and the U.S. And for Lotus PHEV, it is actually quite different from the traditional PHEV structure, which is engine driven. We combined the advantages of ICE engine and also electric motor. It can deliver ultimate performance when it is needed for our customers. For example, on high-speed driving, if it is driven by the motor, it may not be that energy saving. And for our technology, when you drive on the high speeds, this vehicle can be driven by engine. And in total, the technology can deliver both performance and energy-saving features. And it can satisfy the scenarios of lifestyle as well as racetrack. For the Hyper Hybrid Technology, at this moment, it has been widely proven and accepted in China market. And we have also done thorough study for the U.S. and the EU markets. At this moment, there hasn't been such a product existing in those markets. But if our customers is well aware of these products, we believe that they will be interested in this particular model because it can satisfy both the demand from performance vehicle as well as lifestyle vehicle. In the future, our technology is going to be pivoted around this Hyper Hybrid Technology. And at this moment, we are also investigating the feasibility of the Sportscar Hyper Hybrid solution. As for Sportscar, we understand that there is a wider market for the ICE Sportscar, and we were definitely satisfying those retail funds and also petrol head for the Sportscar. At the same time, we also understand that pure electrics Sportscar is not going to attract those attentions. So we are trying to investigate the feasibility of Hyper Hybrid Sportscar to see if it is going to work. In the future, we will prioritize the Hyper Hybrid Technology for both lifestyle vehicle and the Sportscar. Back in -- if you look at the history of Lotus, I think many of you may be aware that Lotus have been relying on external parties or suppliers on its engines such as Toyota and AMG. However, when it comes to PHEV, when Lotus possesses such a technology, we believe we can supplement the drawback of the ICE -- of the lack of ICE engine. Thank you.

Thank you very much, Mr. Feng for your sharing of the insights. And again, thank you all for joining us today. We will conclude the call soon. If you have any questions, please feel free to contact our IR team. This concludes the call. Have a good day, everybody. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]