Company Overview - ECARX Holdings, Inc. is a global mobility tech provider specializing in intelligent driving solutions, recently showcasing its Skyland Pro ADAS at AutoSens China 2024 [1][3] - The company was founded in 2017 and listed on Nasdaq in 2022, employing over 1,800 people across 12 major locations worldwide [7] Product Highlights - The Skyland Pro ADAS solution is now in mass production and powers vehicles such as Lynk & Co 08 EM-P and Lynk & Co 07 EM-P, offering features like parking assistance and highway Navigate-on-Autopilot (NOA) [4] - ECARX is committed to enhancing the performance of Skyland Pro while scaling it across various brands and models, with a clear roadmap for future ADAS solutions [5] Industry Context - AutoSens China 2024 served as a key platform for collaboration among automotive professionals, attracting major companies like Volkswagen, BMW-Brilliance, and NIO [2][8] - The event marked AutoSens's debut in China, emphasizing the growing importance of intelligent driving technologies in the automotive industry [8]

Core Insights - ECARX Holdings, Inc. has entered into a components procurement and R&D services agreement with Geely Automobile Holdings Limited, Zhejiang HUANFU, and Hangzhou Langge to enhance driving technology systems for new energy vehicles [1] - The agreement spans three years, with annual caps of RMB6,387.281 million, RMB6,430.855 million, and RMB6,489.889 million for 2025, 2026, and 2027 respectively, exempting these amounts from independent shareholder approval [1] - ECARX aims to be a reliable source of components and R&D support for Geely Auto brands while also expanding its services to other brands like Volvo, smart, Lotus, and Polestar [2] Company Overview - ECARX is a global automotive technology provider specializing in turnkey solutions for next-generation smart vehicles, including system on a chip (SoC) and central computing platforms [3] - Founded in 2017 and listed on Nasdaq in 2022, ECARX employs over 1,800 people across 12 major locations worldwide [4] - The company was co-founded by Ziyu Shen and Eric Li, who is also the chairman of Zhejiang Geely Holding Group, which owns several global automotive brands [4] - ECARX products are currently utilized in over 7.3 million vehicles globally [4]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of $6 [3]. Core Insights - The company reported its Q3 2024 financial results, which met expectations, showing a revenue of 1.43 billion yuan, a year-on-year increase of 31% [4]. - The revenue growth is attributed to stable performance and ongoing global business expansion [2]. - The company has accelerated its technology product development, with over 7.3 million vehicles globally equipped with its technology as of September 30, 2024 [4]. - The company has a strong project pipeline with over 40 models in development, indicating a diversified approach to vehicle integration [4]. - The company has launched new models in international markets, including the Lynk & Co 02 overseas version and the Smart 5 SUV [5]. Financial Summary - Total revenue projections for 2024, 2025, and 2026 are adjusted to 5.68 billion, 6.88 billion, and 8.68 billion yuan respectively, reflecting a decrease from previous estimates [3]. - The company is expected to continue incurring net losses, with projected net profits of -975 million yuan in 2024, -313 million yuan in 2025, and -32 million yuan in 2026 [3]. - The gross margin is projected to decline to 23% in 2024, with a gradual recovery to 24.6% by 2026 [13]. Operational Highlights - The company has successfully ramped up production at its new manufacturing base in Fuyang, Zhejiang, producing over 30,000 units of the Antora 1000 computing platform for the Geely Galaxy E5 model [5]. - The company has implemented advanced AI capabilities in its vehicles, enhancing safety features for children [4].

Financial Data and Key Metrics Changes - Total revenue for Q3 2024 was RMB1.4 billion, an increase of 31% year-over-year [26] - Gross profit was RMB248 million, a decrease of 25% year-over-year, resulting in a gross margin of 17% [28] - Loss per share was RMB0.97 compared to RMB0.84 in the previous quarter [29] - Adjusted EBITDA loss was RMB233 million, up from a loss of RMB181 million during the same period last year [30] Business Line Data and Key Metrics Changes - Revenue from computing hardware sales was RMB1.2 billion, up 61% year-over-year, driven by demand for the Volvo EX30 and Polestar 4 [26] - Software license revenue was RMB84 million, down 39% year-over-year, but grew by RMB28 million or 49% compared to the last quarter [27] - Service revenue decreased 26% year-over-year to RMB161 million, primarily due to timing differences in completing contracts [27] Market Data and Key Metrics Changes - The global automotive industry is projected to reach approximately 88 million vehicle sales in 2024 [7] - China's automotive market saw total sales increase by 2.4% year-over-year, with electrical vehicle sales up 33% year-over-year, accounting for 39% of total new car sales [8] Company Strategy and Development Direction - The company is focused on expanding its global footprint and optimizing its cost structure to mitigate geopolitical risks [12] - A robust pipeline with over 40 vehicle models currently in development is in place to drive future growth [11] - The strategy includes deepening relationships with existing customers and expanding into non-Geely business segments [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive significant growth despite fierce competition and pricing pressures [12] - The company aims to maintain a gross margin above 20% while focusing on expanding its customer base and optimizing operating expenses [42] Other Important Information - The company has over 613 registered patents and 656 pending patent applications globally as of September 30 [17] - Production capacity has ramped up quickly, with about 30,000 Antora 1000 units produced and shipped for the Galaxy E5 [23] Q&A Session Summary Question: Factors contributing to the decline in sales margin - Management noted fierce market competition and a shift in product mix as key factors affecting margin performance [34][35] Question: Outlook for gross margin in 2025 - Management aims to keep gross margin performance above 20% and expects to recover hardware margins through cost optimization and innovation [41][42] Question: Update on overseas expansion - The company is engaged in RFQ processes with new customers in Europe and anticipates revenue from overseas customers by 2025 [46] Question: Contribution of Geely to revenue - Currently, 90% of revenue comes from Geely and its ecosystem, with expectations to improve non-Geely business mix to 40% by 2026 [49][50]

PC SC X | --- | --- | |---------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Third Quarter 2024 | | | | | | Financial Results | | | | | | | | | | | | November 7, 2024 | | | | | | | | | | | | | | | | | Disclaimers Forward-Looking Statements This presentation contains statements that are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's beliefs and expec ...

Core Insights - ECARX Holdings Inc. has launched the smart 5, a premium mid-size SUV, in partnership with AMD, integrating advanced computing technology for an enhanced in-car experience [1][3] - The smart 5 features a unique intelligent cockpit with six interconnected screens and supports AI applications, showcasing a sophisticated design that aligns with Mercedes-Benz's luxury ethos [2][3] Company Overview - ECARX is a global automotive technology provider, offering full-stack solutions for next-generation smart vehicles, including system on a chip (SoC), central computing platforms, and software [4] - Founded in 2017 and listed on Nasdaq in 2022, ECARX has over 1,900 employees across 12 major locations worldwide, collaborating with various automakers [4] Product Features - The smart 5 utilizes AMD Ryzen™ Embedded V2000 Series processors and ECARX's Makalu® computing platform, delivering a distinctive in-car experience [1][2] - The vehicle's design incorporates the "Crystal Prism" aesthetic, enhancing the user experience with dynamic 3D UI designs and tactile visual effects [2]

SHANGHAI, Oct. 17, 2024 (GLOBE NEWSWIRE) -- ECARX Holdings, Inc. (Nasdaq: ECX) ("ECARX"), a global mobility tech provider, today announced that it will report its financial results for the third quarter of 2024 before the U.S. market opens on Thursday, November 7, 2024. Company management will hold an earnings conference call via live audio webcast to discuss the financial results and will be available to answer questions from analysts and institutional investors. Earnings Conference Call & Webcast Details: ...

Preliminary Note [Important Information About Exchange Rates](index=1&type=section&id=Important%20Information%20About%20Exchange%20Rates) The report converts Renminbi (RMB) to U.S. dollars (US$) at a rate of RMB7.2672 to US$1.00 as of June 28, 2024, for convenience, noting that exchange rates fluctuate significantly and no representation is made about future convertibility - The report uses an exchange rate of **RMB7.2672 to US$1.00** as of June 28, 2024, for convenience translation[2](index=2&type=chunk) - The certified noon buying rate as of September 20, 2024, was **RMB7.0505 to US$1.00**, indicating exchange rate fluctuations[2](index=2&type=chunk) [Forward-Looking Statements](index=1&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements based on management's beliefs and expectations, which are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on management's beliefs and expectations, covering results of operations, financial condition, liquidity, growth, and strategies[3](index=3&type=chunk) - Key risks and uncertainties include developments related to the COVID-19 pandemic, regulatory environment changes, overall economic conditions, R&D progress, relationships with automotive OEMs, and ability to compete[4](index=4&type=chunk) - Other significant factors include the ability to adjust offerings, manage growth, anticipated investments, capital availability, technology trends, product quality, loss of key personnel, and natural disasters[5](index=5&type=chunk) Management's Discussion and Analysis of Financial Condition and Results of Operation [Results of Operations](index=3&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2024, ECARX Holdings Inc. reported a net loss of RMB610.3 million, an increase from RMB405.9 million in the prior year period, with total revenues growing by 26.4% to RMB2,195.3 million, while gross profit declined by 3.5% due to pricing strategy and revenue mix changes | Metric (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Total Revenues | 1,736,601 | 2,195,317 | | Total Cost of Revenues | (1,223,102) | (1,699,542) | | Gross Profit | 513,499 | 495,775 | | Total Operating Expenses | (890,002) | (981,421) | | Loss from Operation | (376,503) | (485,646) | | Net Loss | (405,867) | (610,321) | - Net loss increased by **RMB204.4 million (50.4%)** from **RMB405.9 million** in H1 2023 to **RMB610.3 million** in H1 2024[11](index=11&type=chunk) - Total revenues increased by **RMB458.7 million (26.4%)** to **RMB2,195.3 million** in H1 2024[12](index=12&type=chunk) [Revenue Analysis](index=4&type=section&id=Revenue) Total revenues increased by 26.4% year-over-year, primarily driven by a 34.5% increase in sales of goods revenues, particularly automotive computing platforms, and a 41.3% rise in service revenues due to new vehicle program deliveries and market expansion, despite a 38.9% decrease in software license revenues Revenue by Category | Revenue Category (RMB thousands) | H1 2023 | H1 2024 | Change (RMB thousands) | % Change | | :------------------------------- | :----------- | :----------- | :--------------------- | :------- | | Sales of Goods Revenues | 1,264,263 | 1,700,670 | 436,407 | 34.5 | | Automotive computing platform | 1,053,901 | 1,481,702 | 427,801 | 40.6 | | SoC core modules | 200,255 | 217,376 | 17,121 | 8.5 | | Merchandise and other products | 10,107 | 1,592 | (8,515) | (84.2) | | Software License Revenues | 215,641 | 131,832 | (83,809) | (38.9) | | Service Revenues | 256,697 | 362,815 | 106,118 | 41.3 | | Total Revenues | 1,736,601 | 2,195,317 | 458,716 | 26.4 | - Sales of goods revenues increased by **RMB436.4 million**, driven by demand growth from Geely ecosystem brands and increased volume of Antora series digital cockpit and ADCU[13](index=13&type=chunk) - Service revenues increased by **RMB106.1 million**, mainly due to service completion and delivery of new Antora series vehicle programs, Lotus Alpha, and Volvo EX30 market expansion[15](index=15&type=chunk) [Cost of Revenues](index=4&type=section&id=Cost%20of%20revenues) Total cost of revenues increased by 39.0% to RMB1,699.5 million, outpacing revenue growth, primarily due to a 43.3% rise in cost of goods sold reflecting increased sales volume, and increases in cost of software licenses and services Cost of Revenues by Category | Cost Category (RMB thousands) | H1 2023 | H1 2024 | Change (RMB thousands) | % Change | | :---------------------------- | :----------- | :----------- | :--------------------- | :------- | | Cost of goods sold | 1,000,190 | 1,433,028 | 432,838 | 43.3 | | Cost of software licenses | 37,210 | 44,126 | 6,916 | 18.6 | | Cost of services | 185,702 | 222,388 | 36,686 | 19.8 | | Total Cost of Revenues | 1,223,102 | 1,699,542 | 476,440 | 39.0 | [Gross Profit and Gross Margin](index=5&type=section&id=Gross%20profit%20and%20gross%20margin) Gross profit decreased by 3.5% to RMB495.8 million, and gross margin significantly declined from 29.6% to 22.6%, attributed to a penetration pricing strategy for automotive computing platform revenue and a shift in the revenue mix Gross Profit and Margin | Metric | H1 2023 | H1 2024 | Change (RMB thousands) | % Change | | :----------- | :------ | :------ | :--------------------- | :------- | | Gross profit | 513,499 | 495,775 | (17,724) | (3.5) | | Gross margin | 29.6% | 22.6% | | | - Gross profit decreased due to a penetration pricing strategy for automotive computing platform revenue growth and changes in revenue mix[17](index=17&type=chunk) [Operating Expenses](index=5&type=section&id=Operating%20expenses) Total operating expenses increased by 10.3% to RMB981.4 million, driven by a 19.1% rise in research and development expenses due to continued investment in core product roadmap and future technologies, while selling, general and administrative expenses slightly decreased by 1.6% due to improved operating efficiencies Operating Expenses by Category | Operating Expense (RMB thousands) | H1 2023 | H1 2024 | Change (RMB thousands) | % Change | | :-------------------------------- | :-------- | :-------- | :--------------------- | :------- | | Research and development expenses | 481,600 | 573,367 | 91,767 | 19.1 | | Selling, General and administrative expenses | 414,769 | 408,290 | (6,479) | (1.6) | | Total Operating Expenses | 890,002 | 981,421 | 91,419 | 10.3 | - R&D expenses increased by **RMB91.8 million** due to continued investment in core product roadmap and future technologies[19](index=19&type=chunk) - SG&A expenses decreased by **RMB6.5 million**, primarily due to improved operating efficiencies, partially offset by higher share-based compensation[20](index=20&type=chunk) [Other Income/Expenses](index=5&type=section&id=Other%20Income%2FExpenses) Loss from operation increased to RMB485.6 million, with interest income decreasing and interest expenses rising, while loss from equity method investments significantly increased due to a new joint venture's R&D expenses, and other non-operating income shifted to expenses primarily from fair value losses on an equity security and warrant liabilities Other Income/Expenses Summary | Metric (RMB thousands) | H1 2023 | H1 2024 | Change (RMB thousands) | | :--------------------- | :--------- | :--------- | :--------------------- | | Loss from operation | (376,503) | (485,646) | (109,143) | | Interest income | 17,885 | 11,206 | (6,679) | | Interest expense | (38,228) | (45,495) | (7,267) | | Loss from equity method investments | (25,414) | (67,605) | (42,191) | | Other non-operating (expenses) income | 16,719 | (22,979) | (39,698) | - Loss from equity method investments increased by **RMB42.2 million**, mainly due to significant R&D expenses incurred by a new joint venture with smart and increased loss from an equity method investee[25](index=25&type=chunk) - Other non-operating income shifted to expenses, primarily due to losses in fair value of an equity security (**RMB27.4 million loss** in H1 2024 vs. **RMB27.7 million gain** in H1 2023) and warrant liabilities[26](index=26&type=chunk)[27](index=27&type=chunk) - Government grants increased from **RMB2.7 million** in H1 2023 to **RMB9.2 million** in H1 2024[28](index=28&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA as a non-GAAP financial measure to evaluate operating results and for financial decision-making, believing it helps identify underlying business trends by excluding certain non-operating expenses, with Adjusted EBITDA for H1 2024 being a loss of RMB433.3 million, a significant increase from the prior year - Adjusted EBITDA is defined as net loss excluding interest income, interest expense, income tax expenses, depreciation, amortization, and share-based compensation expenses[30](index=30&type=chunk) Adjusted EBITDA Reconciliation | Metric (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Net Loss | (405,867) | (610,321) | | Interest income | (17,885) | (11,206) | | Interest expense | 38,228 | 45,495 | | Income tax expense/(benefit) | 326 | (198) | | Depreciation | 27,084 | 27,274 | | Amortization | 12,007 | 44,743 | | EBITDA | (346,107) | (504,213) | | Share-based compensation expenses | 52,226 | 70,925 | | Adjusted EBITDA | (293,881) | (433,288) | [Liquidity and Capital Resources](index=8&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position deteriorated, with an accumulated deficit of RMB7,241.2 million and current liabilities exceeding current assets by RMB1,605.0 million as of June 30, 2024, leading to substantial doubt about its ability to continue as a going concern, despite a decrease in net cash used in operating activities and an increase in net cash provided by financing activities Cash Flow Summary | Cash Flow Data (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (960,437) | (416,811) | | Net cash (used in) provided by investing activities | 740,559 | (142,346) | | Net cash provided by financing activities | 231,972 | 749,000 | - As of June 30, 2024, the company had an accumulated deficit of **RMB7,241.2 million** and current liabilities exceeded current assets by **RMB1,605.0 million**[42](index=42&type=chunk) - Net cash used in operating activities decreased by **RMB543.6 million**, primarily due to improved working capital management and cash conversion cycle[46](index=46&type=chunk) - Net cash provided by financing activities increased by **RMB517.0 million**, primarily due to additional borrowings from related parties and banks[50](index=50&type=chunk) [Financing Activities](index=8&type=section&id=Financing%20Activities) The company secured significant new credit lines and loans in H1 2024, including a RMB149 million accounts receivable factoring agreement, a RMB120 million credit line, and RMB360 million in loans, crucial for funding operations and business expansion, as the company has historically relied on financing activities - In January 2023, a **RMB300 million** loan agreement with Zhejiang Geely Holding Group was extended to June 30, 2025, with **RMB100 million** repaid in June 2024[37](index=37&type=chunk) - In March 2024, an accounts receivable factoring agreement for **RMB149 million** was entered into with a Geely Group finance company[38](index=38&type=chunk) - Additional credit lines and loans totaling **RMB120 million** were granted by Shanghai Pudong Development Bank in April 2024[39](index=39&type=chunk) - Industrial Bank granted a **RMB180 million** loan in May 2024 and an additional **RMB180 million** credit line in June 2024[40](index=40&type=chunk) [Material Cash Requirements and Contractual Obligations](index=10&type=section&id=Material%20Cash%20Requirements%20and%20Contractual%20Obligations) Material cash requirements include interest and principal payments for borrowings, operating lease commitments, purchase commitments for R&D services and intangible assets, and capital and investment commitments, totaling RMB2,102.0 million as of June 30, 2024, with RMB1,868.9 million due within one year - Material cash requirements include interest and principal payments for borrowings, operating lease commitments, purchase commitments, and capital commitments[52](index=52&type=chunk) Contractual Obligations | Contractual Obligation (RMB thousands) | Total | Less than one year | | :------------------------------------- | :---------- | :----------------- | | Operating lease commitment | 194,356 | 21,284 | | Purchase commitment | 139,729 | 129,729 | | Capital commitment | 44,405 | 44,405 | | Investment commitment | 23,500 | 23,500 | | Purchase obligations for intangible assets | 100,000 | 50,000 | | Short-term borrowings | 1,600,000 | 1,600,000 | | Total | 2,101,990 | 1,868,918 | [Off-balance Sheets Arrangements](index=11&type=section&id=Off-balance%20Sheets%20Arrangements) The company has not entered into any financial guarantees, other commitments to guarantee third-party payment obligations, derivative contracts indexed to its shares, or retained/contingent interests in assets transferred to unconsolidated entities, nor does it have variable interests in any unconsolidated entities providing financing or other support - The company has not entered into financial guarantees or other commitments to guarantee third-party payment obligations[57](index=57&type=chunk) - No derivative contracts indexed to shares or retained/contingent interests in assets transferred to unconsolidated entities are present[57](index=57&type=chunk) [Quantitative and Qualitative Disclosure about Market Risks](index=11&type=section&id=Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risks) The company's primary market risks are interest rate risk and foreign exchange risk, with interest rate risk not considered material due to the short-term nature of borrowings and investments, while foreign exchange risk arises from fluctuations between RMB and foreign currencies, particularly the U.S. dollar, impacting the value of securities and conversion amounts [Interest Rate Risk](index=11&type=section&id=Interest%20Rate%20Risk) The company's exposure to interest rate risk is primarily related to fixed-rate liabilities and interest income from short-term bank deposits, but due to the short tenure of borrowings and investments, it has not been exposed to material risks from market interest rate changes and does not use derivative financial instruments to manage this risk - Interest rate risk primarily relates to fixed-rate liabilities and interest income from short-term, interest-bearing bank deposits[58](index=58&type=chunk) - Due to the short-term tenure of borrowings and investments, the company has not been exposed to material interest rate risk[58](index=58&type=chunk) [Foreign Exchange Risk](index=11&type=section&id=Foreign%20Exchange%20Risk) The company faces foreign exchange risk due to its international revenues and expenses being denominated in foreign currencies, primarily the U.S. dollar, against the Renminbi, which is not freely convertible and subject to PRC government policies, impacting USD conversion for operations or dividends - Foreign exchange risk arises from fluctuations between Renminbi and foreign currencies, impacting international revenues and expenses[60](index=60&type=chunk) - Renminbi is not freely convertible, and PRC government policies can significantly and unpredictably impact exchange rates[61](index=61&type=chunk)[62](index=62&type=chunk) - As of June 30, 2024, the company held **RMB743.4 million** in RMB-denominated cash and **US$20.1 million** in USD-denominated cash[64](index=64&type=chunk) [Critical Accounting Estimates](index=12&type=section&id=Critical%20Accounting%20Estimates) The preparation of financial statements requires management to make significant estimates and assumptions that can materially affect reported amounts, including service period of connectivity services, expected credit losses, inventory realizability, warranty obligations, useful lives and recoverability of assets, valuation allowances for deferred tax assets, and fair values of various financial instruments - Critical accounting estimates involve significant uncertainty and can materially affect financial condition or results of operations[65](index=65&type=chunk) - Key estimates include expected credit losses, inventory realizability, warranty obligations, asset useful lives and recoverability, and fair values of financial instruments[86](index=86&type=chunk) Index to Unaudited Condensed Consolidated Financial Statements Unaudited Condensed Consolidated Financial Statements [Unaudited Condensed Consolidated Balance Sheets](index=14&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets decreased to RMB4,033.6 million from RMB4,307.2 million, primarily due to a decrease in accounts receivable from related parties, while total liabilities increased to RMB5,443.4 million from RMB5,138.9 million, driven by higher short-term borrowings and amounts due to related parties, resulting in a worsening total shareholders' deficit of RMB1,409.7 million Condensed Consolidated Balance Sheets | Balance Sheet Item (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------------------- | :----------------- | :------------------ | | Total Current Assets | 3,328,321 | 2,946,929 | | Total Non-Current Assets | 978,903 | 1,086,701 | | Total Assets | 4,307,224 | 4,033,630 | | Total Current Liabilities | 4,252,228 | 4,551,904 | | Total Non-Current Liabilities | 886,624 | 891,447 | | Total Liabilities | 5,138,852 | 5,443,351 | | Total Shareholders' Deficit | (831,628) | (1,409,721) | - Accounts receivable – related parties, net decreased significantly from **RMB1,572.7 million** to **RMB934.0 million**[68](index=68&type=chunk) - Short-term borrowings increased from **RMB1,200.0 million** to **RMB1,600.0 million**[70](index=70&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=17&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) For the six months ended June 30, 2024, the company reported a net loss of RMB610.3 million, an increase from RMB405.9 million in the prior year, with total revenues growing by 26.4% but gross profit decreasing by 3.5%, leading to a higher comprehensive loss of RMB623.8 million, partly due to negative foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Loss | Metric (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Total Revenues | 1,736,601 | 2,195,317 | | Gross Profit | 513,499 | 495,775 | | Loss from Operation | (376,503) | (485,646) | | Net Loss | (405,867) | (610,321) | | Comprehensive Loss | (356,892) | (623,806) | - Net loss attributable to ordinary shareholders increased from **RMB375.1 million** to **RMB570.5 million**[74](index=74&type=chunk) - Foreign currency translation adjustments shifted from a gain of **RMB49.0 million** in H1 2023 to a loss of **RMB13.5 million** in H1 2024[74](index=74&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficit](index=18&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Deficit) The total shareholders' deficit increased from RMB831.6 million at January 1, 2024, to RMB1,409.7 million at June 30, 2024, primarily driven by the net loss of RMB610.3 million, partially offset by share-based compensation of RMB70.9 million, and influenced by a decrease from a common control subsidiary combination and negative foreign currency translation adjustments Changes in Shareholders' Deficit | Metric (RMB thousands) | As of Jan 1, 2024 | As of June 30, 2024 | | :--------------------- | :---------------- | :------------------ | | Accumulated deficit | (6,670,686) | (7,241,232) | | Total shareholders' deficit | (831,628) | (1,409,721) | - Net loss of **RMB570.5 million** contributed to the increase in accumulated deficit[77](index=77&type=chunk) - Share-based compensation expenses of **RMB70.9 million** increased additional paid-in capital[77](index=77&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=19&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly decreased from RMB960.4 million in H1 2023 to RMB416.8 million in H1 2024, indicating improved working capital management, while net cash provided by investing activities in H1 2023 turned into net cash used in H1 2024 due to acquisitions and short-term investments, and net cash provided by financing activities substantially increased to RMB749.0 million from additional borrowings Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (960,437) | (416,811) | | Net cash (used in) provided by investing activities | 740,559 | (142,346) | | Net cash provided by financing activities | 231,972 | 749,000 | | Net increase in cash and restricted cash | 26,353 | 188,912 | - Investing activities shifted from providing **RMB740.6 million** cash in H1 2023 (due to Zenseact disposal proceeds) to using **RMB142.3 million** cash in H1 2024 (due to acquisitions and short-term investments)[49](index=49&type=chunk)[80](index=80&type=chunk) - Capital expenditures increased from **RMB48.0 million** in H1 2023 to **RMB56.2 million** in H1 2024[51](index=51&type=chunk) Notes to Unaudited Condensed Consolidated Financial Statements [Summary of Significant Accounting Policies](index=20&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section outlines the basis of presentation for the unaudited condensed consolidated financial statements, prepared in accordance with U.S. GAAP, detailing accounting for common control transactions and asset acquisitions, and discussing key risks such as credit, customer, and supplier concentrations, fair value measurements, convenience translation rates, and prior period reclassifications [Basis of Presentation](index=20&type=section&id=Basis%20of%20presentation) The financial statements are prepared under U.S. GAAP, with certain disclosures condensed, and the company's net loss, net cash outflows from operations, and current liabilities exceeding current assets raise substantial doubt about its ability to continue as a going concern, prompting management to evaluate plans including expense reduction, additional financing, and accelerated collections - The company generated a net loss of **RMB610.3 million** and net cash outflows from operations of **RMB416.8 million** for the six months ended June 30, 2024[83](index=83&type=chunk) - As of June 30, 2024, current liabilities exceeded current assets by **RMB1,605.0 million**, leading to substantial doubt about the company's ability to continue as a going concern[83](index=83&type=chunk)[84](index=84&type=chunk) - Management's plans to continue as a going concern include reducing expenses, obtaining additional financing, and accelerating collections[84](index=84&type=chunk) [Combination Between Entities Under Common Control (HF Tech Europe AB)](index=20&type=section&id=A%20combination%20between%20entities%20under%20common%20control) On June 30, 2024, ECARX acquired a controlling interest in HF Tech Europe AB (HF EU), an entity under common control, for SEK16,111 (RMB10,854), accounted for using the pooling-of-interests method, combining financial information as if it occurred at HF EU's establishment date (January 30, 2023), with HF EU reporting a net loss of RMB17.4 million for H1 2024 - ECARX acquired a controlling interest in HF Tech Europe AB (HF EU) on June 30, 2024, for **RMB10,854**[87](index=87&type=chunk) - The acquisition was accounted for using the pooling-of-interests method, combining financials as if the transaction occurred on January 30, 2023[87](index=87&type=chunk) HF EU Financial Performance | HF EU Metric (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :--------------------------- | :----------------------------- | :----------------------------- | | Revenue | 19,164 | 26,170 | | Net profit / (loss) | 5,461 | (17,395) | [Asset Acquisition of Suzhou Photon-Matrix Optoelectronics Technology Co., Ltd](index=21&type=section&id=Asset%20acquisition%20of%20Suzhou%20Photon-Matrix%20Optoelectronics%20Technology%20Co.,%20Ltd%20(%22Suzhou%20Photon%20Matrix%22)) On January 31, 2024, the company acquired an additional 13.10% equity interest in Suzhou Photon-Matrix for RMB46,306, increasing its stake to 62.27% and gaining control, which was treated as an asset acquisition, not a business combination, as it did not include a substantive process to create output - On January 31, 2024, the company acquired an additional **13.10%** equity interest in Suzhou Photon-Matrix for **RMB46,306**, increasing its stake to **62.27%** and gaining control[90](index=90&type=chunk) - The transaction was accounted for as an asset acquisition because it did not include a substantive process to significantly contribute to the ability to create output[90](index=90&type=chunk) [Risks and Concentration (Credit Risk, Customers, Suppliers)](index=21&type=section&id=Risks%20and%20concentration) The company faces concentration risks in credit, customers, and suppliers, with Geely Group and its subsidiaries accounting for 77.5% of accounts receivable from related parties and 79.4% of total revenues in H1 2024, and notable supplier concentration also present - The company has a concentrated customer base, particularly with Geely Group and its subsidiaries[94](index=94&type=chunk) Customer Concentration | Customer Concentration | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------- | :----------------- | :------------------ | | Geely Group (A/R related parties) | 86.4% | 77.5% | | Geely Group (Total Revenues) | 72.9% | 79.4% | Supplier Concentration | Supplier Concentration | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------- | :----------------- | :------------------ | | Supplier A (A/P) | 15.7% | 18.3% | | Supplier B (A/P) | 12.5% | 16.5% | | Supplier C (A/P) | 22.8% | 12.3% | | Supplier A (Purchases) | 23.1% | 25.7% | | Supplier C (Purchases) | <10.0% | 21.2% | [Fair Value Measurements](index=22&type=section&id=Fair%20value%20measurements) The company measures certain financial assets and liabilities at fair value on a recurring basis, categorizing them into Level 1 (equity securities, public warrant liabilities) and Level 3 (private warrant liabilities) based on observable and unobservable inputs, respectively, while other financial instruments' carrying values approximate their fair values due to short-term maturity or comparable interest rates - Financial assets and liabilities measured at fair value include equity securities (Level 1) and warrant liabilities (Level 1 and Level 3)[99](index=99&type=chunk)[100](index=100&type=chunk) - Carrying values of other financial instruments approximate fair values due to short-term maturity or comparable interest rates[101](index=101&type=chunk) [Convenience Translation](index=23&type=section&id=Convenience%20translation) U.S. dollar amounts in the financial statements are provided for convenience, translated from RMB at a rate of US$1.00 = RMB7.2672 as of June 28, 2024, for presentation only and without implying actual convertibility - U.S. dollar amounts are translated from RMB at **US$1.00 = RMB7.2672** as of June 28, 2024, for convenience[102](index=102&type=chunk) [Prior Period Reclassification](index=23&type=section&id=Prior%20period%20reclassification) Certain prior period amounts were reclassified to align with the current period's presentation, such as combining 'Selling and marketing expenses' and 'General and administrative expenses' into 'Selling, general and administrative expenses,' and consolidating various non-operating income/expense items into 'Other non-operating income (expenses)' - Prior period amounts were reclassified for consistent presentation, including combining selling and marketing expenses with general and administrative expenses[103](index=103&type=chunk)[104](index=104&type=chunk) - Various non-operating income/expense items were consolidated into 'Other non-operating income (expenses)' for the six months ended June 30, 2023[104](index=104&type=chunk) [Cash and Restricted Cash](index=24&type=section&id=Cash%20and%20restricted%20cash) As of June 30, 2024, total cash and restricted cash increased to RMB787.8 million from RMB598.9 million, with most balances held in mainland China and denominated in RMB, while restricted cash significantly decreased from RMB27.1 million to RMB0.2 million due to the resolution of supplier disputes Cash and Restricted Cash Balances | Cash Type (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :------------------------ | :----------------- | :------------------ | | Cash at banks | 571,760 | 787,639 | | Restricted cash | 27,126 | 159 | | Total cash and restricted cash | 598,886 | 787,798 | - Most cash balances are held in mainland China (**RMB749.4 million**) and denominated in RMB (**RMB732.8 million**) as of June 30, 2024[107](index=107&type=chunk) - Restricted cash decreased significantly from **RMB27.1 million** to **RMB0.2 million**, with the prior period including **RMB23.6 million** restricted due to supplier disputes[107](index=107&type=chunk) [Accounts Receivable, Net](index=25&type=section&id=Accounts%20receivable,%20net) Total accounts receivable, net, decreased from RMB1,858.5 million to RMB1,174.0 million, primarily driven by a substantial decrease in accounts receivable from related parties, while the allowance for doubtful accounts increased from RMB13.9 million to RMB26.8 million, and an accounts receivable factoring agreement for RMB149 million was entered into but remains on the balance sheet due to retained recourse obligations Accounts Receivable Balances | Accounts Receivable (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :---------------------------------- | :----------------- | :------------------ | | Accounts receivable, third parties, net | 285,819 | 240,043 | | Accounts receivable, related parties, net | 1,572,703 | 933,973 | | Total Accounts Receivable, net | 1,858,522 | 1,174,016 | - Allowance for doubtful accounts increased from **RMB13.9 million** to **RMB26.8 million**[109](index=109&type=chunk) - An accounts receivable factoring agreement for **RMB149 million** was entered into in March 2024, with the receivables remaining on the balance sheet due to recourse obligations[110](index=110&type=chunk)[111](index=111&type=chunk) [Notes Receivable](index=25&type=section&id=Notes%20receivable) Notes receivable, primarily bank acceptance notes from customers for sales of automotive computing platforms and other products, increased from RMB54.6 million at December 31, 2023, to RMB171.9 million at June 30, 2024, with a small portion pledged as collateral for notes payable Notes Receivable Balance | Metric (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------- | :----------------- | :------------------ | | Notes receivable | 54,634 | 171,926 | - Notes receivable are primarily bank acceptance notes from customers for product sales[112](index=112&type=chunk) - **RMB16 thousand** of notes receivable were pledged as collateral for notes payable as of June 30, 2024[112](index=112&type=chunk) [Inventories](index=26&type=section&id=Inventories) Inventories increased from RMB160.8 million to RMB177.2 million, with increases in raw materials and work-in-process, while finished goods slightly decreased, and inventory write-down for H1 2024 was RMB1.8 million, a significant reduction from RMB9.5 million in the prior year Inventory by Category | Inventory Category (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------------------- | :----------------- | :------------------ | | Raw materials | 90,882 | 106,667 | | Work-in-process | 11,003 | 15,089 | | Finished goods | 58,896 | 55,395 | | Total Inventories | 160,781 | 177,151 | - Inventory write-down decreased from **RMB9.5 million** in H1 2023 to **RMB1.8 million** in H1 2024[113](index=113&type=chunk) [Prepayments and Other Current Assets](index=26&type=section&id=Prepayments%20and%20other%20current%20assets) Prepayments and other current assets decreased from RMB443.5 million to RMB406.7 million, mainly due to a reduction in prepayments to suppliers and contract cost assets, partially offset by an increase in other current assets, with no provision made for these assets in either period Prepayments and Other Current Assets by Category | Asset Category (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :----------------------------- | :----------------- | :------------------ | | Prepayments to suppliers | 302,421 | 271,769 | | Contract cost assets | 104,309 | 61,179 | | Others | 36,770 | 73,756 | | Total | 443,500 | 406,704 | - No provision was made for prepayments and other current assets as of December 31, 2023, and June 30, 2024[114](index=114&type=chunk) [Long-term Investments](index=26&type=section&id=Long-term%20investments) Long-term investments decreased from RMB301.0 million to RMB220.5 million, primarily due to a decrease in equity method investments and a significant loss in the fair value of equity securities (Luminar Technologies, Inc.), with an impairment loss of RMB6.4 million recognized for H1 2024 Long-term Investments by Type | Investment Type (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :------------------------------ | :----------------- | :------------------ | | Equity method investments | 252,407 | 198,468 | | Equity securities measured at fair value | 48,580 | 21,985 | | Total Long-term Investments | 300,987 | 220,453 | - An impairment loss of **RMB6.4 million** was recognized for long-term investments in H1 2024[115](index=115&type=chunk) - The fair value of Luminar Technologies, Inc. shares decreased, resulting in a **RMB27.4 million loss** recorded in H1 2024[118](index=118&type=chunk) [Property and Equipment, Net](index=28&type=section&id=Property%20and%20equipment,%20net) Property and equipment, net, increased from RMB120.8 million to RMB137.3 million, driven by additions to machinery, electronic equipment, and leasehold improvements, with total depreciation expense for H1 2024 being RMB27.3 million and no impairment loss recorded Property and Equipment, Net | Property & Equipment (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :----------------------------------- | :----------------- | :------------------ | | Machinery and electronic equipment | 197,777 | 219,956 | | Leasehold improvements | 44,747 | 57,317 | | Property and equipment, net | 120,785 | 137,259 | Depreciation Allocation | Depreciation Allocation (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | 375 | 539 | | Selling, general and administrative expenses | 15,034 | 14,509 | | Research and development expenses | 11,675 | 12,226 | | Total depreciation | 27,084 | 27,274 | [Intangible Assets, Net](index=29&type=section&id=Intangible%20assets,%20net) Intangible assets, net, significantly increased from RMB179.3 million to RMB294.0 million, primarily due to the acquisition of RMB138.6 million in patents as part of the Suzhou Photon-Matrix asset acquisition, with total amortization expense more than tripling to RMB44.7 million in H1 2024, and an impairment loss of RMB0.6 million recognized for obsolete software Intangible Assets, Net | Intangible Asset (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :------------------------------- | :----------------- | :------------------ | | Software | 121,950 | 143,461 | | Patents | 2,655 | 141,224 | | Intangible assets, net | 179,341 | 294,034 | - The company acquired **RMB138.6 million** in patents through the asset acquisition of Suzhou Photon-Matrix[122](index=122&type=chunk) Amortization Allocation | Amortization Allocation (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | — | 23,954 | | Research and development expenses | 7,105 | 16,184 | | Total amortization | 12,007 | 44,743 | [Short-term Borrowings](index=29&type=section&id=Short-term%20borrowings) Short-term borrowings, consisting entirely of unsecured bank loans, increased from RMB1,200.0 million to RMB1,600.0 million, bearing interest rates from 3.9% to 4.0% per annum, with an unused credit line of RMB100.0 million as of June 30, 2024 Short-term Borrowings | Metric (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------- | :----------------- | :------------------ | | Unsecured bank loans | 1,200,000 | 1,600,000 | - Short-term borrowings bear interest rates of **3.9%** and **4.0%** per annum as of June 30, 2024[124](index=124&type=chunk) - The company had an unused credit line of **RMB100.0 million** as of June 30, 2024[124](index=124&type=chunk) [Leases](index=30&type=section&id=Leases) Total lease costs increased from RMB24.5 million in H1 2023 to RMB26.8 million in H1 2024, primarily due to operating lease costs, with operating lease right-of-use assets increasing slightly to RMB126.8 million, a weighted average remaining lease term of 5.98 years, and cash paid for operating leases increasing to RMB17.6 million Lease Costs | Lease Cost (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Operating lease costs | 22,854 | 25,289 | | Short-term lease costs | 1,660 | 1,529 | | Total | 24,514 | 26,818 | Lease Metrics | Lease Metrics | As of Dec 31, 2023 | As of June 30, 2024 | | :------------------------- | :----------------- | :------------------ | | Operating lease right-of-use assets | 125,205 | 126,811 | | Weighted average remaining lease term (years) | 6.14 | 5.98 | | Weighted average discount rate | 8.65% | 8.39% | - Cash paid for operating leases increased from **RMB6.5 million** in H1 2023 to **RMB17.6 million** in H1 2024[129](index=129&type=chunk) [Accrued Expenses and Other Current Liabilities and Provision](index=31&type=section&id=Accrued%20expenses%20and%20other%20current%20liabilities%20and%20Provision) Accrued expenses and other current liabilities decreased from RMB614.5 million to RMB425.0 million, mainly due to reductions in salaries and benefits payables, and taxes payable, while product warranties increased from RMB132.8 million to RMB140.1 million, with current and non-current portions Accrued Expenses and Other Current Liabilities | Liability Category (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------------------- | :----------------- | :------------------ | | Salaries and benefits payables | 257,207 | 110,899 | | Taxes payable | 101,487 | 80,591 | | Product warranties | 41,924 | 42,553 | | Accrued expenses and other current liabilities | 614,540 | 424,964 | Product Warranties | Product Warranties (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------------------- | :----------------- | :------------------ | | Balance at beginning of period | 92,148 | 132,795 | | Additions | 85,161 | 25,679 | | Settlements | (44,514) | (18,371) | | Balance at end of period | 132,795 | 140,103 | [Convertible Notes Payable](index=31&type=section&id=Convertible%20notes%20payable) Convertible notes payable increased from RMB455.7 million to RMB467.6 million, due November 8, 2025, and are measured at fair value using a binomial model, categorized as Level 3 due to unobservable inputs, with a fair value of RMB415.7 million as of June 30, 2024 Convertible Notes Payable | Metric (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :--------------------- | :----------------- | :------------------ | | Principal amount | 461,494 | 472,368 | | Net Carrying amount | 455,701 | 467,617 | | Fair Value | 396,884 | 415,702 | - The fair value of convertible notes payable is estimated using a binomial model with key assumptions including risk-free rate, volatility, and bond yield[133](index=133&type=chunk) [Warrant Liabilities](index=32&type=section&id=Warrant%20liabilities) Total warrant liabilities increased from RMB5.1 million to RMB5.5 million, with public warrants measured using Level 1 inputs and private warrants using Level 3 inputs and a Binomial Option Pricing Model, resulting in a RMB0.2 million loss due to changes in the fair value of private warrants in H1 2024 Warrant Liabilities | Warrant Type (RMB thousands) | As of Jan 1, 2024 | Loss due to change in fair value | As of June 30, 2024 | | :--------------------------- | :---------------- | :------------------------------- | :------------------ | | ECARX Public Warrants | 3,195 | — | 3,270 | | ECARX Private Warrants | 1,946 | 236 | 2,231 | | Total | 5,141 | 236 | 5,501 | - Public warrants are measured using Level 1 inputs, while private warrants use Level 3 inputs and a Binomial Option Pricing Model[134](index=134&type=chunk) - Key assumptions for private warrant valuation include a risk-free rate of **4.47%**, volatility of **43.49%**, and an expected term of **3.5 years** as of June 30, 2024[135](index=135&type=chunk) [Share Based Compensation](index=33&type=section&id=Share%20based%20compensation) Total share-based compensation expenses recognized for RSUs and options increased from RMB52.2 million in H1 2023 to RMB70.9 million in H1 2024, with 117,250 RSUs and 4,960,570 share options granted in H1 2024, and RMB66.2 million of unrecognized compensation expense expected to be recognized over a weighted-average period of 1.2 years Share-Based Compensation Expense Allocation | Compensation Expense (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative expenses | 32,565 | 55,066 | | Research and development expenses | 19,661 | 15,859 | | Total | 52,226 | 70,925 | - In H1 2024, **117,250 RSUs** were granted and fully vested, and **4,960,570 share options** were granted to employees[141](index=141&type=chunk)[142](index=142&type=chunk) - As of June 30, 2024, **RMB66.2 million** of unrecognized compensation expense is expected to be recognized over a weighted-average period of **1.2 years**[144](index=144&type=chunk) [Revenue Information](index=36&type=section&id=Revenue%20information) Total revenues increased by 26.4% to RMB2,195.3 million in H1 2024, with sales of goods revenues, particularly automotive computing platforms, being the largest contributor, growing by 34.5%, while service revenues also increased significantly, and the majority of revenues (97.6% in H1 2024) were generated in the PRC and recognized at a point in time Revenue by Category | Revenue Category (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Sales of goods revenues | 1,264,263 | 1,700,670 | | Software license revenues | 215,641 | 131,832 | | Service revenues | 256,697 | 362,815 | | Total revenues | 1,736,601 | 2,195,317 | Timing of Revenue Recognition | Timing of Revenue Recognition (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :----------------------------- | :----------------------------- | | Point in time | 1,637,093 | 2,117,155 | | Over time | 99,508 | 78,162 | | Total revenues | 1,736,601 | 2,195,317 | - **97.6%** of the company's revenues were generated in the PRC for the six months ended June 30, 2024[147](index=147&type=chunk) [Other Non-operating Income (Expenses), Net](index=37&type=section&id=Other%20Non-operating%20Income%20(Expenses),%20Net) Other non-operating income (expenses), net, shifted from a net income of RMB16.7 million in H1 2023 to a net expense of RMB23.0 million in H1 2024, primarily driven by a significant loss in the fair value of an equity security and warrant liabilities, partially offset by an increase in government grants and a reduction in foreign currency exchange losses Other Non-operating Income (Expenses), Net | Item (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------- | :----------------------------- | :----------------------------- | | Change in fair value of an equity security | 27,722 | (27,421) | | Change in fair value of warrant liabilities | 4,781 | (236) | | Government grants | 2,695 | 9,172 | | Foreign currency exchange losses, net | (34,668) | (4,494) | | Total other non-operating income (expenses), net | 16,719 | (22,979) | [Income Taxes](index=37&type=section&id=Income%20taxes) The statutory income tax rate for the company is 25%, with the effective income tax rate differing from the statutory rate primarily due to the recognition of a full valuation allowance for deferred income tax assets of loss-making entities - The statutory income tax rate is **25%** for both periods[151](index=151&type=chunk) - The effective income tax rate differs from the statutory rate due to the full valuation allowance for deferred income tax assets of loss-making entities[151](index=151&type=chunk) [Loss Per Share](index=37&type=section&id=Loss%20per%20share) Basic and diluted net loss per ordinary share increased from RMB1.11 in H1 2023 to RMB1.69 in H1 2024, reflecting the higher net loss attributable to ordinary shareholders, while the weighted average number of ordinary shares used in the calculation remained relatively stable Loss Per Share | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to ECARX Holdings Inc. | (375,126) | (570,546) | | Weighted average number of ordinary shares | 337,395,390 | 337,935,301 | | Net loss per share – Basic and diluted | (1.11) | (1.69) | - Potential dilutive instruments (warrants, share options, convertible notes) were anti-dilutive and thus excluded from diluted loss per share calculation[153](index=153&type=chunk) [Commitments and Contingencies](index=38&type=section&id=Commitments%20and%20Contingencies) As of June 30, 2024, the company had various contractual commitments, including purchase commitments for R&D services totaling RMB139.7 million (RMB129.7 million due within one year), capital commitments for expenditures of RMB44.4 million (all due within one year), and investment commitments related to the acquisition of remaining equity in Hubei Dongjun amounting to RMB23.5 million (also due within one year) Commitments | Commitment Type (RMB thousands) | Total | Less than one year | | :------------------------------ | :------ | :----------------- | | Purchase commitments | 139,729 | 129,729 | | Capital commitments | 44,405 | 44,405 | | Investment commitments | 23,500 | 23,500 | - Investment commitments relate to the acquisition of the remaining **51%** equity interest in Hubei Dongjun[157](index=157&type=chunk) [Related Party Balances and Transactions](index=39&type=section&id=Related%20party%20balances%20and%20transactions) The company has significant balances and transactions with related parties, primarily Geely Group and its subsidiaries, with related party revenues increasing to RMB1,924.9 million in H1 2024, and substantial accounts receivable from related parties (RMB934.0 million) and amounts due to related parties (RMB375.7 million) reflecting significant financing and operational interdependencies - Major related parties include Zhejiang Geely Holding Group and its subsidiaries, and entities under significant influence of the company[158](index=158&type=chunk) Related Party Transactions | Related Party Transaction (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | 1,439,678 | 1,924,865 | | Purchase of products and services | 216,079 | 376,504 | | Interest income on loans due from related parties | 6,771 | 5,899 | | Interest expense on borrowings due to related parties | 6,116 | 7,706 | | Borrowings from related parties | 300,000 | 449,000 | Related Party Balances | Related Party Balance (RMB thousands) | As of Dec 31, 2023 | As of June 30, 2024 | | :------------------------------------ | :----------------- | :------------------ | | Accounts receivable – related parties, net | 1,572,703 | 933,973 | | Amounts due from related parties | 74,122 | 91,398 | | Accounts payable – related parties | 312,830 | 403,424 | | Amounts due to related parties | 35,664 | 375,696 | [Subsequent Events](index=41&type=section&id=Subsequent%20events) After June 30, 2024, the company acquired the remaining 51% equity interest in Hubei Dongjun for RMB23.5 million, making it a wholly-owned subsidiary, and sold its 40% minority stake in HaleyTek AB to Volvo Cars for SEK210.0 million (RMB140.2 million) - On July 15, 2024, the company acquired the remaining **51%** equity interest in Hubei Dongjun for **RMB23.5 million**, making it a wholly-owned subsidiary[171](index=171&type=chunk) - On August 1, 2024, the company sold its **40%** minority stake in HaleyTek AB to Volvo Cars for **SEK210.0 million (RMB140.2 million)**[172](index=172&type=chunk)

Core Insights - ECARX Holdings Inc. has successfully launched the Lynk & Co Z10 luxury sedan, integrating its Makalu® computing platform powered by AMD Ryzen™ Embedded V2000 processors, marking a significant milestone in automotive technology collaboration with AMD [1][4] - The Z10 debuted in Sweden in June 2024, showcasing advanced features of the Makalu® platform and setting new benchmarks for automotive digital cockpit innovation [2] - The ECARX Cloudpeak® software stack enhances the performance of the AMD Ryzen Embedded V2000 processor, providing a customizable platform for infotainment and advanced driver assistance systems [3] Company Overview - ECARX is a global automotive technology provider, delivering turnkey solutions for next-generation smart vehicles, including system on a chip (SoC), central computing platforms, and software [5] - Founded in 2017 and listed on Nasdaq in 2022, ECARX has over 1,900 employees across 12 major locations worldwide, including China, the UK, the USA, Sweden, Germany, and Malaysia [6] - The company is co-founded by Ziyu Shen and Eric Li, with ownership interests in global automotive brands such as Lotus, Lynk & Co, Polestar, Smart, and Volvo Cars [6]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of $6 [1]. Core Insights - The company reported Q2 2024 financial results that met expectations, achieving revenue of 1.26 billion yuan, a year-on-year increase of 31%, with a gross margin of 23%, up 1 percentage point quarter-on-quarter [2]. - Revenue growth is attributed to the continuous mass production of vehicles equipped with the company's technology products, which have been installed in over 6.9 million vehicles globally, representing a 32% year-on-year increase [4]. - The company is expected to achieve total revenues of 5.85 billion yuan in 2024, 8.2 billion yuan in 2025, and 10.53 billion yuan in 2026, with corresponding price-to-sales ratios of 1.2, 0.9, and 0.7 [2]. Financial Performance Summary - For 2023, the company reported total revenue of 4.666 billion yuan, with a projected increase to 5.852 billion yuan in 2024, 8.201 billion yuan in 2025, and 10.530 billion yuan in 2026, reflecting growth rates of 31.2%, 25.4%, 40.1%, and 28.4% respectively [2][6]. - The net profit attributable to the parent company is projected to improve from a loss of 940 million yuan in 2023 to a profit of 295 million yuan in 2026, indicating a significant turnaround [2][6]. - The company’s earnings per share are expected to turn positive, reaching 0.11 yuan in 2025 and 0.87 yuan in 2026 [2]. Strategic Developments - The company has accelerated its global strategy, with five new projects focused on overseas models, including a collaboration with a well-known European automaker [4]. - A new manufacturing base in Fuyang, Zhejiang, commenced mass production in April 2024, marking a key milestone in enhancing the company's vertical integration and supply chain capabilities [4].