EHang Holdings Limited announced its unaudited financial results for the fourth quarter and full year ended Dece. 31, 2019.

Fourth Quarter 2019 Financial and Operational Highlights

• Total revenues were RMB54.7 million (US$7.9 million), an increase of 421.4 percent year over year and an increase of 57.4 percent sequentially. Revenues from air mobility solutions were RMB37.1 million (US$5.3 million), an increase of 63.6 times year over year and an increase of 49.1 percent sequentially.
• Gross margin was 60.7 percent, an increase of 4.6 percentage points year over year and an increase of 5.8 percentage points sequentially.  
• Operating profit was RMB2.1 million (US$0.3 million), compared with operating loss of RMB22.9 million in the fourth quarter of 2018 and operating loss of RMB10.6 million in the prior quarter.  
• Adjusted operating profit¹ (non-GAAP) was RMB3.8 million (US$0.5 million), compared with adjusted operating loss of RMB17.8 million in the fourth quarter of 2018 and an adjusted operating loss of RMB7.4 million in the prior quarter.  
• Net loss was RMB0.2 million (US$0.02 million), compared with net loss of RMB30.7 million in the fourth quarter of 2018 and net loss of RMB10.2 million in the prior quarter.  
• Adjusted net income² (non-GAAP) was RMB2.9 million (US$0.4 million), compared with adjusted net loss of RMB25.6 million in the fourth quarter of 2018 and adjusted net loss of RMB7.0 million in the prior quarter.  
• Net cash provided by operating activities was RMB15.2 million (US$2.2 million), significant growth from negative RMB6.7 million in the fourth quarter of 2018 and negative RMB30.4 million in the prior quarter.  
• Sales of the EHang 216, the world’s first commercially delivered passenger-grade AAV, reached 26 units, compared with none in the fourth quarter of 2018 and 18 units in the prior quarter.

             Full Year 2019 Financial and Operational Highlights

• Total revenues were RMB121.8 million (US$17.5 million), an increase of 83.2 percent from RMB66.5 million in 2018. Revenues from air mobility solutions were RMB85.9 million (US$12.3 million), an increase of 26.6 times from RMB3.1 million in 2018.  
• Gross margin was 58.5 percent, an increase of 7.7 percentage points from 50.8 percent in 2018.  
• Operating loss was RMB46.3 million (US$6.7 million), a decrease of 37.7 percent from RMB74.3 million in 2018.  
• Adjusted operating loss (non-GAAP) was RMB31.6 million (US$4.5 million), a decrease of 39.3 percent from RMB52.0 million in 2018.  
• Net loss was RMB48.0 million (US$6.9 million), a decrease of 40.4 percent from RMB80.5 million in 2018.  
• Adjusted net loss (non-GAAP) was RMB31.9 million (US$4.6 million), a decrease of 45.2 percent from RMB58.2 million in 2018.  
• Sales of the passenger-grade AAVs reached 61 units³ in 2019, compared with only 3 units in 2018.

              Business Highlights for the Fourth Quarter and Full Year 2019

• On Dec. 12, 2019, EHang successfully completed its initial public offering (IPO) of its American depositary shares (ADSs)⁴ listed on Nasdaq Global Market under the ticker symbol “EH” and became the world’s first publicly traded Urban Air Mobility (UAM) company.    
• EHang carried out trial or demo flights (including passenger-carrying flights) in 15 cities across China and Europe in 2019 to showcase the UAM applications. These cities include Guangzhou, Taizhou, Suzhou, Hangzhou, Chongqing, Yantai, Shenyang, Changchun, Dalian, Harbin, Shijiazhuang, Yangjiang, Turpan and Kashgar in China and Vienna in Europe.  
• EHang established partnerships on UAM with city governments in China and Europe in 2019, including Guangzhou in China and Linz in Austria.  The Company expects to establish more city partnerships in 2020 to expand its UAM footprint globally.  
• As the first company approved for the passenger-grade AAV airworthiness certification pilot program by the Civil Aviation Administration of China (CAAC) and a member of the CAAC Special Expert Taskforce, EHang has been playing an important role in developing standards and regulations in China, such as the Provisional Administrative Measures for Trial Operations of Special Types of Unmanned Aerial Vehicles.  
• In October 2019, the Company signed an agreement to establish a command-and-control center for unmanned aerial system traffic management (UTM) at Heydar Aliyev International Airport in Baku, Azerbaijan, first of its kind globally.  
• Under a strategic partnership with Vodafone GmbH established in October 2019, Vodafone will provide 5G connectivity to EHang AAVs for UAM applications in Europe and the parties will cooperate in the development of a UAM ecosystem in Europe.  
• EHang hired Mr. Edward Xu, the Ex-Head of Asia Transportation Research at Morgan Stanley, as its Chief Strategy Officer to lead the strategic planning initiatives in UAM.

Huazhi Hu, EHang’s founder, chairman and chief executive officer commented, “In December 2019, EHang successfully completed its IPO on Nasdaq and became the world’s first publicly traded UAM company, which was a milestone achievement not only for EHang but also for the whole industry. As a new public company, EHang delivered record high quarterly results with impressive financial and operating performance. Our revenues grew significantly, gross margin continued to increase and we achieved first ever quarterly positive operating cash flow and operating profit. Such achievements reflect our strong competitive advantages arising from our global leadership in the UAM industry. Our business is experiencing some short-term turbulence from the COVID-19 outbreak. These include absence and late return of frontline workers, delayed fulfillment across our supply chain, and the short-term disruption on some of our customers’ industries such as tourism. However, this has also created new opportunities for us to explore, such as emergency delivery and rescue. We are confident in the long-term growth and robustness of our business. We are very optimistic about the future of the global UAM industry, which is expected to reach US$1.5 trillion by 2040 according to Morgan Stanley. We are confident that we will keep our leadership in this promising industry.”

Hu continued, “We are the first to enter into commercialization in the global industry. Our first-mover advantage has helped us be a pioneer in commercializing AAVs and establishing market standards.  Our breakthroughs in the regulatory front, both in China and internationally (e.g. having obtained the first flight permit for the EHang 216 AAV by the Federal Administration of Aviation (FAA) in the US and the first flight permit for the EHang 216 AAV by the Civil Aviation Authority in Norway), have also underpinned our industry leadership and enhanced our customers’ confidence globally. Leveraging all these, we aim to not just be a technology product provider but a leading UAM platform company offering a comprehensive suite of solutions and services to develop an integrated UAM ecosystem. We look forward to building more partnerships with other businesses, city governments, regulators and investors globally to achieve this strategic goal and benefiting together from fast growing demands for UAM globally.”

Fourth Quarter 2019 Financial Results

Revenues

Total revenues were RMB54.7 million (US$7.9 million), up 421.4 percent year over year, and up 57.4 percent sequentially. Growth was driven by the Company’s core business of air mobility solutions, which represented 67.9 percent of total revenues.  Sales of the EHang 216, the Company’s flagship passenger-grade AAV, reached 26 units compared with none in the same period of 2018.

Costs of revenues

Costs of revenues were RMB21.5 million (US$3.1 million), up 367.1 percent year over year, and up 37.1 percent sequentially, primarily due to the increased volume of AAVs sold.

Gross profit

Gross profit was RMB33.2 million (US$4.8 million), up 463.9 percent from RMB5.9 million in the fourth quarter of 2018 and up 74.1 percent from RMB19.1 million in the prior quarter.

Gross margin was 60.7 percent, up 4.6 percentage points from 56.1 percent in the fourth quarter of 2018 and up 5.8 percentage points from 54.9 percent in the prior quarter.  Margin increased due to favorable revenue mix, as the Company derived a greater proportion of revenues from sales of higher-margin AAVs and other high margin solutions.               

Operating expenses   

Total operating expenses were RMB33.0 million (US$4.7 million), up 7.2 percent from RMB30.8 million in the fourth quarter of 2018, and up 10.0 percent from RMB30.0 million in the prior quarter. Operating expenses as a percentage of total revenues was 60.3 percent, compared with 293.3 percent in the fourth quarter of 2018 and 86.3 percent in the prior quarter. The increase in operating expenses was primarily due to higher sales and marketing expenses as the Company has entered the commercialization phase of EHang 216, its flagship passenger-grade AAV product, and higher research and development expenses as a result of continuous efforts in product development.

• Sales and marketing expenses were RMB8.2 million (US$1.2 million), up 54.1 percent from RMB5.3 million in the fourth quarter of 2018, and up 32.4 percent from RMB6.2 million in the prior quarter. The increase in sales and marketing expense was mainly due to higher advertising and promotion expenses, as well as higher employee compensation and travel expenses related to the Company’s increased marketing efforts to promote air mobility solutions globally.  
• General and administration expenses were RMB9.4 million (US$1.3 million), down 23.3 percent from RMB12.2 million in the fourth quarter of 2018 and down 3.4 percent from RMB9.7 million in the prior quarter. The year-over-year decrease was mainly due to higher professional expenses incurred in the fourth quarter of last year when the Company started to prepare for a potential initial public offering.  
• Research and development expenses were RMB15.5 million (US$2.2 million), up 16.6 percent from RMB13.3 million in the fourth quarter of 2018 and up 9.5% from RMB14.1 million in the prior quarter. The increase was mainly due to higher research and development human and material expenses as the Company continued to strengthen its product development efforts.

Adjusted operating expenses⁵ (non-GAAP)

Adjusted operating expenses were RMB31.4 million (US$4.5 million), representing an increase of 21.3 percent from RMB25.8 million in the fourth quarter of 2018 and an increase of 16.8 percent from RMB26.8 million in the prior quarter.  Adjusted operating expenses as a percentage of total revenues was 57.3 percent, compared with 246.4 percent in the fourth quarter of 2018 and 77.3 percent in the prior quarter.               Operating profit

Operating profit was RMB2.1 million (US$0.3 million), compared with operating loss of RMB22.9 million in the fourth quarter of 2018 and operating loss of RMB10.6 million in the prior quarter.  Operating margin was 3.9 percent, compared with negative 218.3 percent in the fourth quarter of 2018 and negative 30.5 percent in the prior quarter.               

Adjusted operating profit (non-GAAP)

Adjusted operating profit was RMB3.8 million (US$0.5 million) compared with adjusted operating loss of RMB17.8 million in the fourth quarter of 2018 and adjusted operating loss of RMB7.4 million in the prior quarter. Adjusted operating margin was 6.9 percent, compared to negative 169.7 percent in the fourth quarter of 2018 and negative 21.2 percent in the prior quarter. Positive operating profit is a milestone for the Company.              

Net loss

Net loss was RMB0.2 million (US$0.02 million) with a net loss margin of 0.3 percent, compared with net loss of RMB30.7 million in the fourth quarter of 2018 and net loss of RMB10.2 million in the prior quarter.

Adjusted net income (non-GAAP)

Adjusted net income was RMB2.9 million (US$0.4 million) with an adjusted net margin of 5.2 percent, a significant improvement of RMB28.5 million compared with adjusted net loss of RMB25.6 million in the fourth quarter of 2018, and compared to adjusted net loss of RMB7.0 million in the prior quarter.

Adjusted net income attributable to EHang’s ordinary shareholders was RMB1.1 million (US$0.2 million) with an adjusted net margin of 2.0 percent.              

Earnings / loss per share and per ADS

Basic and diluted net loss per ordinary share were both RMB0.22 (US$0.03). Adjusted basic and diluted net income per ordinary share⁶ (non-GAAP) were both RMB0.02 (US$0.003).

Basic and diluted net loss per ADS were both RMB0.44 (US$0.06). Adjusted basic and diluted net income per ADS⁷ (non-GAAP) were both RMB0.04 (US$0.006).

Full Year 2019 Financial Results

Revenues

Total revenues were RMB121.8 million (US$17.5 million), up 83.2 percent from RMB66.5 million in 2018, primarily driven by the significant increase in revenues generated from the Company’s core business of air mobility solutions, representing 70.5 percent of total revenues.  Sales of the passenger-grade AAVs reached 61 units compared to only 3 units in 2018.

Costs of revenues

Costs of revenues were RMB50.6 million (US$7.3 million), representing an increase of 54.5 percent from RMB32.7 million in 2018, primarily due to the rapid growth of air mobility solutions.

Gross profit

Gross profit was RMB71.2 million (US$10.2 million), up 111.0 percent from RMB33.7 million in 2018. Gross margin was 58.5 percent, up 7.7 percentage points from 50.8 percent in 2018. This significant increase was mainly due to the rapid growth of the Company’s core business of air mobility solutions, which has relatively higher gross margins, and other high margin solutions.               

Operating expenses   

Total operating expenses were RMB121.0 million (US$17.4 million), up 3.9 percent from RMB116.4 million in 2018. Operating expenses as a percentage of total revenues was 99.3 percent, compared with 175.1 percent in 2018. The increase in operating expenses was primarily due to the increase in sales and marketing expenses, as the Company continued to strengthen its commercialization efforts.

• Sales and marketing expenses were RMB26.9 million (USD$3.9 million), up 33.1 percent from RMB20.2 million in 2018, mainly due to higher advertising and promotion expenses, as well as employee compensation and travel expenses related to the Company’s increased marketing efforts to promote air mobility solutions globally.  
• General and administration expenses were RMB36.9 million (US$5.3 million), up slightly by 2.8 percent from RMB35.9 million in 2018 as a result of the Company’s efforts in maximizing the operating leverage effect.  
• Research and development expenses were RMB57.2 million (US$8.2 million), down 5.2 percent from RMB60.3 million in 2018, as the Company shifted more efforts towards its commercialization after completing the initial product development phase of its flagship product, EHang 216, in 2019.

Adjusted operating expenses (non-GAAP)

Adjusted operating expenses were RMB106.6 million, up 12.4 percent from RMB94.8 million in 2018.  Adjusted operating expenses as a percentage of total revenue was 87.5 percent, compared to 142.6 percent in 2018.

Operating loss

Operating loss was RMB46.3 million (US$6.7 million), decreased by 37.7 percentfrom RMB74.3 million in 2018. Operating loss as a percentage of total revenues was 38.0 percent, compared with 111.8 percent in 2018.          

Adjusted operating loss (non-GAAP)

Adjusted operating loss was RMB31.6 million (US$4.5 million), decreased by 39.3 percent from RMB52.0 million in 2018. Adjusted operating loss as a percentage of total revenues was 25.9 percent, compared with 78.3 percent in 2018. 

Net loss

Net loss was RMB48.0 million (US$6.9 million), down 40.4 percent from RMB80.5 million in 2018. Net loss as a percentage of total revenues was 39.4 percent, compared with 121.0 percent in 2018.

Adjusted net loss (non-GAAP)

Adjusted net loss was RMB31.9 million (US$4.6 million), decreased 45.2 percent from RMB58.2 million in 2018. Adjusted net loss as a percentage of total revenues was 26.2 percent, compared with 87.5 percent in 2018.

Loss per share and per ADS

Basic and diluted net loss per ordinary share were both RMB1.24 (US$0.18) in 2019. Adjusted basic and diluted net loss per ordinary share (non-GAAP) were both RMB0.53 (US$0.08).              

Basic and diluted net loss per ADS were both RMB2.48 (US$0.36) in 2019. Adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB1.06 (US$0.16).

Business Outlook

Although there are short-term impacts of the COVID-19 outbreak on the Company’s supply chain and some of the customers’ industries, the Company is gradually recovering to normal operations and business initiatives, and the Company expects that the year-over-year growth of its annual total revenues in 2020 will be at least 200 percent.

The above outlook is based on information available as of the date of this press release and reflects the Company’s current and preliminary expectation, which is subject to change in light of uncertainties and situations related to how COVID-19 develops.