EHang Holdings (NASDAQ:EH) Q4 2020 Earnings Call

0:00 Good day, ladies and gentlemen. Thank you for standing by and welcome to Yihang's fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's conference. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Julia Qian, Managing Director of the Blue Shirt Group Asia. Ms. Qian, please proceed.

0:37 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 full year of 2020. We released the results early today. The press release is available on the company's website as well as from Newswire Services. On the call with me today are Mr. Hu Huazi, Chief Executive Officer, Mr. Edward Xu, Chief Strategy Officer, and Mr. Richard Liu, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made on the safe harbor provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

1:23 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 filing with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that today's call, management will also discuss certain non-GAAP financial measurements for comparison purposes only. Our gap results and the reconciliation of gaps to non-gap measures can be found in our earnings press release. Also, please note that unless otherwise stated, all the figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our CEO, Mr. Hu Huazi. Mr.

2:18 Hu was speaking in Chinese, and then our CSO Edward Xu will translate his comments to English. Please go ahead, Mr.

2:26 Hu. Hello, everyone. I am Huazhi Hu, founder of Yihang. Thank you for attending our telephone meeting today. 2020 is an extraordinary year. I and the entire management team would like to thank all the employees of the company for their hard work. We would also like to thank all our partners and investors for their support. Today, I would like to take this opportunity to tell you about Yihang. First of all, I would like to tell you about our vision. Since the first day of our business, many people have asked me what Yihang's vision is. Today, I would like to systematically explain Yihang's mission, vision, and strategy, so that everyone can understand Yihang more clearly, understand Yihang's dream, understand Yihang's value, and our future.

3:15 In my heart, Yihang will provide complete personal door-to-door air travel products for humans and become service providers for air travel. Yihang is a technology-innovative air smart transportation transportation service provider that will strive to become the leader of the next generation of automated air traffic. Our mission is to make everyone enjoy the convenience and pleasure of mid-to-long-term air traffic. In the future, we will make Yihang into a We believe that under the trend of automatic driving and rapid development, Service will become the core of the transportation industry and will become the price of the entire industry chain. From a long-term perspective, manufacturers will be integrated by the service industry. For example, the innovative enterprise of transportation transportation, Waymo and Nura, are implementing a integrated integration of software hardware and services.

4:35 Re-define the transportation transportation industry. The market of urban air transportation services is big and growing fast. One industry has a chance to become the definition of the industry. According to Morgan Stanley's research report, by 2040, the market size of global urban air traffic will reach $1.5 trillion. We believe that Yihang can become the leader of UAM transportation services and take up a considerable part of its market share. In the past 10 years of technological accumulation and product innovation, we have been fully confident and capable of achieving this goal. Next, I will follow the technology one. No driver 2. Full backup 3. Total control So far, E-Hang 184 and E-Hang 216 have completed from battery system, transmission system, power system, power management system, Chia-Hung Yang, Zhao Wang, Shuai Feng, Xiaona Li, Anne Ji At this point, I would like to thank the partners who accompanied us along the way.

6:20 They helped us complete a lot of early work and received a lot of support. We completed the first step of Yihang's vision in 2017. At the same time, from the first day of Yihang's establishment, we firmly invested in and optimized the construction of the system system. We believe that Yihang's products are an innovative new type of transportation tool, not exclusive to pilots. It's a product for every ordinary person. It must have a complete system support. Non-human intelligent driving is the soul of a product. We know that planes cannot fly around without rules. This will cause impact on the future air traffic system. In 2017, we established our own, and the world's first, non-human driving pilot command and control center. We continue to optimize group control and management technology.

7:15 We believe that group control and management is also an important barrier for future flight operations. Without the group management of the command and control center, autonomous driving will no longer be safe and reliable. The management between the aircraft will produce huge difficulties. Group control and management technology will set a good foundation for us as a drone factory and for the entire system. At the same time, it will also generate extremely valuable drone team performance services and drone air logistics port. More importantly, are the earliest and most widely used companies in the world's UAM field. Together with our partners in China, South Korea, the Netherlands, the United States, Canada, Dubai, Qatar, and many other countries, we have carried out numerous UAMs. Every time, our aircraft can attract countless people to see the convenience of future transportation.

8:05 In addition, In 2017, we started a series of cooperation with the Chinese Civil Aviation Bureau to set up unmanned air traffic standards. From the pilot flight permit issued by us in the earliest year of 2018 to the pilot flight permit issued by Yihang 216, and then to the official approval of Yihang 216's pilot test flight approval last year, the Civil Aviation Bureau has been closely accompanying our growth from the General Bureau to the Local Bureau. Just a few days ago, we held an expert group test flight approval meeting of the Civil Aviation Bureau have officially entered the audit phase. We are steadily advancing the process of E-Hang 216 obtaining the license. This is also the second step for us to gradually complete our vision from 2018. Remember Elon Musk once said, if Tesla completes automatic driving, Tesla will no longer sell cars, but provide automatic air travel services.

9:02 For E-Hang, E-Hang has long understood that the best way to drive in the air In 2020, we felt that our future transportation was getting closer and closer to us. Yihang has achieved many breakthroughs and achievements in products, systems, and production. Based on the Yihang 216 manned self-driving aircraft, we have launched Yihang 216F and Yihang 216L models to actively explore the application scenarios of self-driving aircraft in the field of aerial fire, large-capacity logistics, and aerial transportation.

9:56 In terms of the layout of the city's aerial traffic network, our Yihang 216 manned aircraft and its light and agile capability already have the ability to communicate within the city. In order to meet the demand for a longer range, we are about to launch a new aircraft with a range of more than 300 kilometers, as an addition to the network between cities and cities. Combined with the existing 216, it will complete the communication between cities and cities, making the future city air traffic network stronger and better. In terms of products, I will report to you three breakthroughs. First of all, I am very happy to introduce It is also the first time to announce the development progress of our VT series of long-range smart aircraft.

10:43 Two years ago, we set up a VT series of product development, from size to size, VT-10, VT-20, and VT-30. The VT series uses a composite design of pure electric multi-selector and fixed-selector. VT-30 is a product designed for people in the VT series. In terms of safety and efficiency choices, we chose safety. VT30 products have high-level error detection capabilities to ensure that errors occur when the aircraft is flying horizontally and can be automatically switched to vertical take-off status and can bring passengers safely to the ground as soon as possible. After a considerable period of verification and exploration, we did not choose the design when the aircraft was turned around. In the end, we decided to use this structure as our long-distance aircraft design. In other types of aircraft, whether the propeller is turned around or the wings are turned around, are not able to have complete flight backup in all flight modes, while the Fuhayi design can ensure complete flight backup in all flight modes. The importance of flight backup for unmanned aircraft must be the first priority.

11:50 Light turns and other designs will certainly bring complexity to the operating system, leading to an increase in error rate. In order to ensure that flight efficiency is not lost on the basis of this design, we have made the overall design of the aircraft lightweight. made the aircraft's overall weight under 700 kg, allowing the aircraft to have good back-end aerobatics and good long-distance flight capability. We noticed that there was a media announcement that we are about to release a new product with a flight distance of up to 400 km. I believe it refers to our VT30, and it has a picture. This picture is a patent application picture of our VT2.5 transition product, not a real VT30 design picture. Recently, the product will fly in the northwest of China in a wide area.

12:36 We look forward to the official release of the VT-30 with the appearance and related parameters of the specific aircraft. VT-20 and VT-10 are small aircraft of our same type with two other multi-purpose aircraft. In the early stage, VT-20 participated in the flight verification work of the vertical take-off and landing flight system. It has also formed a perfect and mature product and entered the stage of small batch production. Its loading flight time is more than three hours, will fly at a speed of 70 to 120 kilometers per hour. In the future, it will be responsible for the route inspection and planning tasks of VT30's fully automatic flight. It is an indispensable product in the future UAM's basic planning process, and it can also be used in the unmanned aircraft application of our smart city command center.

13:21 In addition, we will also release the M series product of Yihang 216. This is a product that can be manually driven. It is expected that within this year's May, Chia-Hung Yang, Zhao Wang, Shuai Feng, Xiaona Li We plan to establish a flight experience paradise with our partners in the future, using the electronic fence to close, so that everyone can enjoy the pleasure of flying manually and fulfill everyone's dream of flying.

14:14 In addition, we have achieved significant progress in the drone logistics port in Hezhou. A series of all-automobile logistics stabilizers of the Yihang Flying Shark series have completed a series of large-scale flight tests there. have completed a large-scale full-automation flight from take-off to landing. Hezhou Holdings Limited will also become the first unmanned airport. In addition to the system maintenance personnel, there is no operational personnel in the entire system operation. All aircraft are automatically operated by the command and control system. In terms of production and development, we have also achieved considerable progress. First of all, The production base we established in Guangdong Yunfu will be officially invested in June this year. The products of Yihang are all in line with the materials as the main structure materials. The production of its subsidiary products is traditionally more of a full-fledged production. Yihang Yunfu base will continue to invest in the next two years and gradually upgrade to an all-automatic production model with an automated production line to further improve the quality and consistency of the products.

15:23 We will expand the construction in Guangzhou We believe that more innovative products will be born here. In the next part, I will share with you the development path of Yihang in the future. We will achieve our strategic goals through the following four strategic paths. First, focus on the research and development of cargo and logistics products. The core is the research and development of Yihang 216 short-range flagship aircraft and VT long-range aircraft. The first is to serve the operation as a guide to strengthen the barriers between the technology and products of the industry Focus on the safety, battery life, and delivery capacity of the products Second, build a first-class talent team based on the principle of the operator According to the strategic positioning of the city air traffic platform operator Start to gradually realize the upgrade from the manufacturer to the operator And for this, recruit top-level traffic transportation operation professionals Thirdly, focus on the small-scale business that is related to the goal of completing the stage-based goal, and focus on the small-scale business related to people and logistics services such as air media and smart city management.

16:41 Let the entire company focus on the core business level, but our efforts to upgrade to operating service providers need to go through a period of smooth transition. At the same time, these businesses will gradually be handed over to our partners in the future. We expect that the company's income in this regard will not change significantly. Fourth, to accelerate the expansion and regularization of the city air traffic operation-related test sites and regulations, and to actively expand the operation services such as tourism, transportation, logistics, and other related test sites. To build and operate test sites in China and abroad, to carry out operation services, and many more. In 2021, we will focus more on the development of aircraft carriers and logistics smart aircraft. With the continuous completion and production of our new production bases, we expect that in 2021, Yihang will also achieve a greater number of production and manufacturing of smart aircraft carriers and logistics aircraft.

17:43 This year, we will gradually develop air aircraft carriers and logistics pilot services, In addition to delivering new aircraft to our former customers and partners, we will also invest a part of the aircraft into test operation services. At the same time, we will actively run test operation services in more cities around the world. Based on this, we will also announce the relevant data of our operation services to the market, such as the order volume of operation services, the number of active users, the process of service, and income, etc. Thank you Mr. Hu Now I'm glad to translate Mr. Hu's remarks into English Hello everyone

18:50 Thank you for joining our earnings conference call today. In the unusual year of 2020, our management team and I appreciate the efforts and support of our employees, partners, and investors. Today, I would like to take this opportunity to tell more about Yi Hang. Since our founding, many people have asked me about the vision of Yi Hang. Today, I would like to elaborate our mission, vision, and our strategy so that you can understand EHAM better In my mind, EHAM will become an air mobility service provider of the integrated door-to-door air transportation products for individuals EHAM is a technological innovation-driven air mobility service provider committed to lead the next generation of autonomous urban air mobility Our mission is to enable safe, autonomous, and eco-friendly air mobility services for everyone In the future, we will build EHAM into a Tesla in the air allowing people to use EHAM's air taxi services as easily as using Uber today and to enjoy the convenient door-to-door air transportation Similarly, our air logistics services will also provide convenience for people's lives We have been executing our strategy based upon our unwavering mission and vision as well as our long-term view of the future transportation industry and

20:20 in-depth understanding of Ehang's first mover advantages We believe that with the rapid development of autonomous driving autonomous flying services will become the focus of the transport sector and compel a price of the market In the long run The function of OEM manufacturers will be integrated and consolidated by the service providers. For example, Waymo and Neuro, two innovative transport enterprises, are redefining the transport sector by integrating software, hardware, and services. The UAM industry is promising, which is expected to reach $1.5 trillion by 2040, according to the research report published by Morgan Stanley.

21:07 We believe with our decades of experiences in technology and product innovation we will continue to be a leader and take significant share of the market Our technology accumulation and product innovation in the past decade gives us full confidence and ability to achieve this goal Now I will tell you more about the development path of EHAM following three steps of technologies, rules, and services First of all, in terms of product research and development EHAM's vision for future air mobility is based upon three original concepts First, autonomous flying Second, full redundancy system And third, cluster management So far, Ehang 1A4 and Ehang 216 have completed the full redundancy designs of battery system, speed control system, power system, battery management system, flight control system, and navigation system.

22:14 Whenever any system fails, the backup system will take effect and the aircraft can continue to fly without falling, which is totally different from the ordinary drones. We have carried out the flight tests for more than five years, including a number of extreme tests and flight tests in harsh conditions, such as the full power maneuverability test, heavy snow and fog test, high attitude maneuverability test, seaside salt haze environment test, manned typhoon test, electromagnetic and vibration test, etc. Here, I would like to express my sincere gratitude to our partners who have been with us along the way.

23:02 Thanks to their strong support, we successfully completed the first step of our vision in 2017. At the same time, since our inception, we have been committed to building and optimizing our systems. We firmly believe that Ehang's AEVs are the pioneering New type of transportation Our products are not developed exclusively for pilots but for everyone who doesn't need to go through rigorous pilot training and testing Our AAVs are automated and operated by a complete set of systems Autonomous flying is the soul of our products We deeply understand that aircraft can't fly around without rules, which will have an adverse impact on the future air traffic system.

23:56 Therefore, back in 2017, we established our own command control centers for AEVs, which was also the first of its kind in the world. Since then, we have constantly optimized the cluster management technologies. We believe that cluster management is also an important guarantee for future flight operations Without cluster management of the Command Control Center autonomous aerial vehicles will no longer be safe and reliable and will cause huge difficulties to manage among aircraft Cluster management technologies have laid a good foundation for the whole system of our unmanned airport and derived an incredibly valuable concept i.e.

24:44 the air media performance services and the logistic port for unmanned air vehicles More importantly, Yihang is a company in the global UAM field that is the first to carry out the UAM flight test and conducted the most tests widely in this area Together with our partners, we have carried out numerous test flights in countries such as China, South Korea, and Netherlands, and the United States, Canada, UAE, Qatar, etc. Every time our flying vehicles take off, it attracts countless attentions in the local area, giving people a glimpse of the ease of transportation in the future. In addition, as early as 2017, We cooperated with the CAEC to jointly develop the standards for unmanned air traffic From the first test flight permit in 2018 to the trial operation approval of the EHON 216 for airway logistics and to the official acceptance of our application of the airworthiness certification for EHON 216 passenger-grade AEVs in the last year The CAEC has been closely working with us along our growth Just two days ago, we held the Airworthless certification meeting with a national expert group from CEAC, which means we have officially entered the certification stage.

26:15 We are steadily moving forward to obtaining the Airworthless certificate of 216. This is the second step for us to gradually complete our vision since 2018. Elon Musk once said, In the wake of its success in auto driving, Tesla will stop selling cars and start to provide autonomous travel services Yihan understood from the earliest days of the best way for offering autonomous air mobility is to provide autonomous air travel services and has struggled to realize this vision Today, we are opening up a new chapter and about to embark on a new journey of becoming the world's leading UAM service provider.

27:03 This will be our most anticipated third step of Yi Hang Vision. In this fiscal year of 2020, The future transportation we envision is getting closer and EHAM has made numerous breakthroughs and achievements in many fronts including the product systems and the production capacity Based upon the EHAM 216 passenger grade AAVs we launched the EHAM 216F and EHAM 216L models to actively explore application scenarios for AAVs in the fields of air firefighting and large load logistics transportation In terms of the development of UAM network, our Ehang 216 passenger grade AAVs have ability to carry out air transportation in the city due to its lightness and flexibility.

27:55 In order to meet the needs of longer ranges, we are about to launch a new model, VT30, with a flight range of more than 300 kilometers as supplement to the intercity UAM network. Combined with the existing 216, VT30 will fulfill the intercity traffic connection within the city clusters, making the future UAM network stronger and more complete. On the product development front, I would like to share with you three breakthroughs. First of all, I'm very pleased to introduce for the first time the development progress of our VT service of medium to longer range intelligent aircraft.

28:43 As early as two years ago, we laid out a strategic development roadmap of the VT series of products in the order of size VT10, VT20, and VT30 VT series is a hybrid vehicle design that configurates both pure electric multi-rotor and fixed-wing VT30 is designed for carrying passengers in VT series Between the choices of safety and efficiency, we chose safety as our first priority VT30 products have advanced fault detection capability which can ensure that if the aircraft fails during flight it can quickly and automatically switch to vertical takeoff and landing form which can bring the passengers to the ground safely as soon as possible After a considerable period of time of demonstration and exploration, we did not choose the tiltrotor design. No matter multi-rotor or tiltrotor cannot have a full redundancy capability in all flight modes, while the hybrid design can ensure a complete flight redundancy capability in all flight modes.

29:59 Redundancy for safety must be the first priority for autonomous air vehicles. Other designs like the tilt rotor will definitely add additional complexity to the operation system leading to the increase of the failure rate In order to ensure certain level of flight efficiency for our hybrid design we make a lightweight for the overall design of the aircraft and overall weight of the aircraft is within 700 kilograms so that the aircraft not only has good backup robustness but also has a good long-range flight capability We noticed that some media previously reviewed that we are about to release a new product with a flying distance of 400 kilometers I believe it refers to our VT30 but the media picture is actually a picture of the transition product VT25 for its patent application rather than the picture of the VT30 We plan to perform trial flights of VT30 in open areas in northwestern China in the near future Please look out to our official release of the VT30 in which the specific aircraft shape, design and related technical parameters will be published VT20 and VT10 are another two multi-purpose small aircraft of the same type in our VT service In the early stage, VT20

31:31 participated in the flight verification of VTOL flight systems and other work Now, it also formed a mature product and has entered the stage of small batch production Its flight time with payload is more than 3 hours and the flight speed is between 30 to 120 km per hour In the future, it will undertake the flight router survey and planning for VT30 fully autonomous flight It is an indispensable product in the future UAM infrastructure planning process and can also be used for UAV applications in our smart city command and control centers Moreover, we will release the Ehang 216M, a manual pilot model of Ehang 216 AAV The Ehang 216M is expected to obtain a special airworthless certificate in the experimental category from CEAC in May of this year. As a sports electric vehicle, the Ehang 216M is with Similar control systems as a traditional helicopter but simpler and more reliable and it can switch to autopilot mode with one click for all around the safety protection In 2019 we got the certificate

33:01 of unmanned aircraft system UAS fence issued to us by the CAC Under the protection of our UAS fence one click takeoff and landing will make the flight safer In the future, we plan to work with our partners to establish a flight experience park with UAS fence so that everyone can realize their dream of enjoying the fun with manual flights under safety protection. In addition, we have made a significant progress in the AAV logistic port that we collaborate with our partners in Hezhou in Guangxi province of China. Our flight shark service of fixed-wing AAV designed for aerial logistics have completed a large number of flight tests there, realizing a fleet of fully autonomous flight from takeoff to landing from point A to point B.

33:54 Meanwhile, the Hezhou AAV logistic port is expected to become the first unmanned airport with no operators in the whole system operation except for the system maintenance personnel, and all aircraft will be operated automatically by the command control system. We have also made remarkable progress in production and R&D Our new production facility in Yunfu will officially start production in June this year The structure of Yihang's product is mainly made of composite materials and the production of its composite products is traditionally a manual process We will continue to invest in Yunfu facility in the next two years and gradually upgrade to fully automated production lines to further improve the product quality and consistency We will expand our R&D base for intelligent aircraft in our Guangzhou headquarters and believe that more innovative products will be born here Future development path We will achieve our strategic goals through the following four strategic paths First, we will remain focused on R&D capabilities for our passenger grade and logistics products With the development of EHONT-16 service of short to medium range flagship aircraft and VT service of

35:26 long range aircraft as a core and the service operation as the orientation we will continue to strengthen our technologies and increase the bar and focus on improving product safety, flight duration performance and passenger and cargo capacity Second, build a first-class talent team as an operator According to the established strategic positioning As an urban air mobility platform operator we will gradually upgrade from a manufacturer to an operation service provider and recruit the top level talents for transportation operation Third, we will concentrate our resources in our core business and gradually divest the air media, smart city management and other businesses which are less relevant to our air mobility business However Our efforts to upgrade to an operation service provider need a smooth transition period These businesses will be gradually outsourced to our partners in the future but we expect no material impact in the revenues of related businesses Last, we will continue to expand our trial UAM operational basis and air mobility scenarios such as tourism, transportation, logistics, etc.

36:51 and actively build a number of trial operational base domestically and overseas to carry out operational services At the same time, we will continue to accelerate the completion of compliance work such as airworthless certificate and transportation certificate In 2021, we will focus more on the R&D of AEVs for passengers and logistics As our new production facility continues to be completed and put into production we expect that in 2021 we will produce a large number of intelligent passenger logistic aircraft This year we will gradually carry out air passenger and logistic trial operation services In addition to selling AAVs to our existing customers and partners we will also use some AAVs for trial operation services At the same time, we will actively carry out trial operation services in more cities around the world.

37:54 On this basis, we will simultaneously disclose the relevant data of operation services, such as order volume of operational services, number of active users, service mileage, and revenues, etc. We are confident that Ehang will become a leader in the UAM industry with our dedication and outstanding execution capability. We believe we will make impact in the world and enable people to experience convenient and safe air mobility services in the near future. Next, my colleagues will continue to provide more details. Thank you. Those were Mr. Hu's remarks. Now let me elaborate on our strategy and plan.

38:44 Hello, this is Edward Xu, Chief Strategy Officer of EHOM. Based upon the Board decisions that consider the firm's long-term strategic goal, EHOM's business model will experience a gradual transition in 2021 from a pure equipment sales model towards an operation platform model. This decision is a result of the board's deep thoughts and discussions that thoroughly consider the following conditions. First, to be a UAM platform operator is the ultimate goal of EHAM. As a world leading UAM firm, we are dedicated to providing comprehensive and effective solutions. To this end, we have not only built the most advanced AEVs such as EHAM 216, but also grasp the key relevant technologies such as cluster management so that we are able to operate multiple remote AAVs simultaneously through our centralized platform based upon predetermined and fixed routes.

39:50 This whole system enables a seamless integration of AAV manufacturing and operations laying a solid foundation for us to become a UAM platform operator. Different from some peer companies, our business does not only cover the designing and manufacturing of equipment, AAVs alone but also system-wide solutions for real operations including route planning, standard setting, 4G, 5G communications, etc. We are building a large ecosystem for UAM which is compatible with existing systems for civil aviation Therefore, we have positioned ourselves as a UAM platform operator from the very beginning of our IPO We believe this is our ultimate choice Second, safety is our top priority As the delivery volumes of Ehang 216 continues to increase it adds responsibilities on the customer side to ensure operational safety For a highly innovative product as such with no precedence It demands high level of safety standards for daily operations Therefore, we believe it is critical for us to take full and direct control of daily operations of Ehang 216 AAVs to ensure 100% safety Third, the timing for Ehang 216 commercialization is opportune We have conducted

41:24 over 10,000 flights of Ehang 216 AAVs in the past three to four years and have accumulated a considerable amount of real data. Based upon the latest results of the recent communications with the CAC, we see significant progress in airworthless certification for Ehang 216. We are hopeful in achieving meaningful progresses in 2021 towards the final stages in certification This will open the door for further commercialization of E-Han 216 that enables an upgraded version of UAM operation Therefore, we should make sufficient preparations for large-scale operation in future To support this important strategic initiative and also fulfill some customer orders in 2021, we are aiming to produce approximately 250 units of EHON 216 in the year, which will be a new record for the company once achieved.

42:30 Finally, attractive outlook for UAM operations. More importantly, we see a highly attractive outlook for an upgraded model of UAM operations based upon our are fully autonomous air vehicles. Different from the conventional models of civil or general aviation, our model ensures a higher level of safety, service quality, and profitability, but lower levels of operational costs. Our financial analysis shows highly attractive investment returns with a short payback period for our equipment versus the conventional civil or general aviation. Considering the benefits of a large sharing platform built upon self-owned fleet at a relatively lower cost, we expect a higher degree of equipment utilization and return profiles.

43:25 Considering various factors, we have planned a 100 air mobility route initiative by selecting 100 meaningful flight routes for trial operations within China. By accumulating more operating data and experiences, we will be more prepared to launch large-scale commercialization activities. Meanwhile, we are planning to release operating data such as flight routes, flight sorties, and passenger volumes, etc., as mentioned by Mr. Hu. I will now turn the call over to our CFO, Mr. Richard Liu, to provide the financial results for the fourth quarter and the full year of 2020.

44:11 Richard, please go ahead. Thank you.

44:15 Thank you, Edward, and hello everyone. Before I go into details, please note that all numbers presented are in RMB and are for the fourth quarter of 2020, unless stated otherwise. All percentage changes are on a year-over-year basis, unless otherwise specified. Detail analysis is contained in our earnings press release, which is available on our IR website. I'm going to highlight some of the key points here. In Q4 2020, total revenues were $54.6 million, on par with total revenue of $54.7 million in the same period of 2019. Due to the resurgence of COVID-19 pandemic in the quarter, the total units of Yihang 216 sold were 22 units versus 26 units in the same period in 2019, costing the revenue from air mobility solutions to decrease 10% year-over-year.

45:07 However, our revenues from airway media solutions increased steadily, offsetting the decrease in air mobility and driving up our total revenues. In full year of 2020, our total revenues increased 47.8% year-over-year, reaching $180 million. We are pleased to maintain a robust annual revenue growth despite the pandemic impacts globally. Adjusted gross profit in Q4, excluding share-based compensation expenses, amounted to 34.8 million. This led to adjusted gross margin of 63.8%, which was 3.1 percentage points higher than that of last year, and the highest quarterly adjusted gross margin in the company's history. Adjusted growth profit for the full year 2020 was 108.6 million, up 51.7% from 71.6 million in 2019. Adjusted growth margin for the full year 2020 was 60.3%, up 1.5% from 58.8% in 2019, and also the highest annual adjusted growth margin.

46:02 This reflected the competitive strengths of the companies. An increase was mainly due to a favorable revenue mix with a greater proportion of revenues from sales of higher margin models of Yihang to 16 AAVs. Adjusted operating expenses, excluding share-based compensation expenses, increased by 50.5% to 47.2 million and as a percentage of total revenues was 86.5% as compared to 57.3% in Q4 2019. were mainly increased expenditures in R&D of new models, including both passenger-grade and non-passenger-grade AAV models and related operating systems with enhanced functionalities.

46:58 As a result, our adjusted operating loss in Q4 was 10.6 million, compared to an adjusted operating profit of 3.8 million in Q4 2019. Adjusted operating loss as a percentage of total revenues was negative 19.5%, compared to adjusted operating margin of 6.9% in Q4 2019. With adjusted operating loss in Q4, our adjusted net loss was 12.3 million compared with adjusted net income of 2.9 million in Q4 2019. For the full year of 2020, our adjusted net loss was 37.2 million compared with adjusted net loss of 31.9 million in 2019. Now let's turn to the balance sheet and cash flow.

47:45 We ended the quarter with $189.4 million of cash, cash equivalents, restricted cash, and short-term investments. The account's receivable balance of $179.4 million has been reduced to $103.1 million, with subsequent collection of $76.3 million as of March 31, 2021, representing 42.5% of the have been collected. Together with the private investment of 40 million US dollars in late January, it is expected that the company has adequate funding to support the operations in the next 12 to 24 months at least. Now let's turn to the business outlook. Our business is experiencing a gradual transition into a more operation-driven model. Given our ultimate strategic goal is to build a UN platform operator company, We view now is the right time to accelerate this process for better commercialization.

48:46 Specifically, we are planning to launch a 100 air mobility route initiative in China from 2021 and onward. We believe the time is opportune as we are getting into the final stages of airworthiness certification of our Yihang 216 AAVs. As a result, we expect annual revenues in 2021 to range between RMB $130 million and $180 million. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question now, Please press star 1 on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad.

49:48 Our first question comes from Tim Seo from Morgan Stanley. Please go ahead.

49:55 Hi, Mr. Hu, Edward, and Richard. Thanks for taking my questions. I have two quick questions. I'm sure the management team have already touched on this topic for several times. And according to the company's announcement that we do see some progress in terms of the regulatory breakthrough and with further collaboration with CAAC certification team. But again, how should that translate into more details about timing of official instead of special awareness certificate when we can get that. And with that, how should we think about the potential holdings upon the payment of the certificates?

50:46 My second question is about the competitive landscape because we saw several players are making or plan to make inroads into this market. And will that change the industry dynamics meaningfully and risk Yihan's dominance and our current collaboration with the government at the moment? Thanks.

51:09 Well, thank you, Tim. This is Edward. Let me take your questions. So, yeah, first question regarding the type certificate progress. So it was very great progress we have made two days ago with a special meeting with delegates from CAC. These are very high-level senior members from all over the country and representing different sub-bureaus for the CAC. And during the meeting, it is actually the kickoff meeting. and the CEC officials highly recognize our progress and so the message here is quite optimistic.

51:57 However, I cannot tell you the exact timing for when we can get the certification, but based upon our communication so far, we are quite confident about this issue. and about the potential orders you mentioned, I think definitely this will break the last hurdle or the last bottleneck from the regulation perspective, which will lay a very good foundation for our future commercialization of our products. And so that is definitely a very good message. and your second question regarding the competitive dynamics, right?

52:46 So we understand that nowadays we see quite a number of companies who are making their own products and including some auto companies as well. However, we are quite confident about our technology which created this entry barrier from the technological perspective. because as we mentioned earlier, we are not only a company who focus on designing and manufacturing the vehicle itself. We are creating a whole system. We are building a platform. That is a very key difference which set us from all the other peers. And we believe that this will definitely give us a first mover advantage that we are building you know a platform and setting the standards and right now working with the CAC delegates another major task is to set the standards for the certification and so we are working very closely with CAC officials in setting the new standards and we are very proud of that and so that is also a very different perspective and it makes us very unique

54:16 in this industry and so we are quite confident about our technology, about our system and our whole idea of future UAM. I hope this answers your question and if you have any further questions please let me know. Thank you.

54:35 Yes, very clear. Thank you very much, Edward. Thank you. Our next question comes from Vincent Yu of Needham and Company. Please go ahead.

54:49 Thank you, management, for taking my question. I have two questions and one follow-up question. My two questions is on the order and the client. The first question is on order book. Can management go into more details on our existing order book and the split between orders that we have received, basically the buying deposits versus the ones that are just pure intentional contracts? And my second question on the client is that previously we have been working with some tourism sites, according to what I remember. Are we expanding our client base, like for example 216F?

55:36 Are we expanding to governments? And what's our current client base looks like? And my third question is a follow-up on the timing of the airworthiness certificates. We totally understand it's hard to predict the exact timing, but there are very rough kind of predictions, like say, mid-year or by the year end or next year? What kind of rough timing that we can predict? Thank you.

56:11 Our order backlog is on a running basis.

56:24 So right now, at this moment, there are roughly around 100 units. And in terms of international versus domestic, actually a majority of this are from within China, as you can imagine, given the still ongoing global pandemic impact. And about 40% with the deposit or prepayments.

56:53 Yeah, Vincent, this is Edward here. I answered your second question about the Ehang 216F, right? So this is a specially designed AAV for firefighting purpose. However, we are still in the process of obtaining the last certification from the government and there are two items which we need to do by conducting some experiments to prove the capability and also obtaining the final certification from the government. And the client base will gradually, will generally be the government, the firefighting department.

57:39 and the emergency department from different provincial government. And so far we received very positive feedback from the government. However, we still need to go through the certification and so that we are able to enter the national purchase catalog so that the government can place order for that. And regarding your last question about the timing of the type certificate, we believe that, as I mentioned, we cannot predict the exact timing. But based upon the message from the government officials, it is quite optimistic, we should say. and also the whole process should be a gradual process which means that towards the final certification there could be some several milestones during the whole process which we expect to achieve and to get recognized and so I think during which we should be able to share the news with the market in the next six to 12 months about the progress. And so that is what we can say now. Thank you.

59:05 Thank you. Great. Thank you. We are approaching the end of the conference. If you have further questions, please contact us by email or phone after the conference call. Let me turn the call back to Mr. Liu for closing remarks.

59:27 Thank you, operator, and thank you all for participating on today's call and for all your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you. This concludes today's conference call. Thank you for participating.