WeRide (NasdaqGM:WRD) Q4 2025 Earnings call March 23, 2026 08:00 AM ET Speaker4Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to WeRide's Q4 and full year 2025 earnings conference call. Please note that today's event is being recorded. At this time, all participants are in listen-only mode. For today's call, management will use English as the main language. A third-party interpreter will provide simultaneous Chinese interpretation. The company will be hosting a q ...

Financial Data and Key Metrics Changes - In Q4 2025, sales increased by 2% to $10.8 billion, with adjusted EBIT margin expanding by 100 basis points to 7.5% [7][12] - For the full year, sales were $42 billion, slightly down due to softer volumes in North America and Europe, while adjusted EBIT margin rose by 20 basis points to 5.6% [8][9] - Adjusted EPS rose by 29% in Q4 to $2.18 and increased by 6% for the full year to $5.73 [7][8] - Free cash flow for the full year reached $1.9 billion, an increase of $849 million [8][18] Business Line Data and Key Metrics Changes - Three of the four segments posted higher sales year-over-year, with seating increasing by 8%, while complete vehicles saw a decline of 10% [16] - Adjusted EBIT margin for body exteriors and structures and seating improved year-over-year, with seating margins benefiting from a warranty pool reversal [16][17] - Power and vision margins were negatively impacted by discrete items, but operational improvements are expected to drive margin expansion in 2026 [17] Market Data and Key Metrics Changes - Global light vehicle production was down 1% overall in Q4, with North America and China declining, while Europe saw an increase [13] - Magna's sales growth is expected to be near flat to up 3.5% in 2026, driven by new program launches and foreign currency translation [21] Company Strategy and Development Direction - The company is focused on operational excellence initiatives, which contributed to margin expansion and are expected to continue delivering benefits in 2026 [10][26] - A disciplined approach to capital spending is emphasized, with plans to repurchase approximately 22 million shares in 2026 while maintaining financial flexibility [6][24] - The outlook for 2026 includes expected adjusted EBIT margin expansion of 40-100 basis points and strong free cash flow [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing their capital allocation strategy and driving EPS growth alongside strong free cash flow [6][26] - The company anticipates a relatively flat light vehicle production environment overall, with slight declines in North America and China offset by increases in Europe [20][21] - Management highlighted the importance of operational excellence and customer recoveries in achieving financial targets [31][38] Other Important Information - The company achieved significant milestones in 2025, including hitting annual bookings targets and securing 90% of its 2028 business [9] - Magna was recognized as one of the world's most ethical companies and most admired companies, reflecting strong corporate governance [11] Q&A Session Summary Question: Guidance for outgrowth excluding complete vehicles - Management attributed the outgrowth guidance of 1%-4% to operational excellence activities and new program launches [29][31] Question: Operational excellence and commercial recoveries - Management confirmed that operational excellence is a continuing journey, with expectations for ongoing margin improvements [35][36] Question: Seating segment outlook - Management reassured that seating remains a core business, with no loss of incumbent programs, and highlighted the impact of program roll-offs on margins [45][46] Question: Free cash flow sustainability - Management indicated that the guidance for free cash flow in 2026 is sustainable, targeting a conversion of 100% on net income [51][52] Question: Ford recall and warranty impacts - Management clarified that one recall matter was resolved, while another is ongoing, impacting margins in the power and vision segment [54][63] Question: Growth in power and vision segment - Management noted that growth in the power and vision segment is driven by new launches and operational improvements [64][66]

Company Overview - Zhejiang Hexia Technology Co., Ltd. (referred to as Hexia Technology) was established in 2017 and is headquartered in Zhejiang Province. It has become a leading automotive testing solution provider in the region, collaborating with numerous domestic and international automotive manufacturers [3] - The company's automotive testing solutions include automotive testing, testing system integration, and automotive component sales. Its testing services play a crucial role in the R&D of new internal combustion engine vehicles and new energy vehicles, ensuring compliance with performance and regulatory standards [3] - Since 2022, Hexia Technology has expanded its testing services to include Advanced Driver Assistance Systems (ADAS) testing, which enhances driving safety and comfort through integrated electronic systems [3] Financial Performance - For the nine months ending September 30, 2024, and 2025, the company's revenues were approximately RMB 138 million and RMB 124 million, respectively [5] - The company reported losses of RMB 23.73 million and RMB 10.35 million for the same periods [6] - The gross profit margins for these periods were 32.4% and 30.4%, respectively [7] Industry Overview - The automotive testing services market in China is experiencing stable growth, with the market size increasing from RMB 14.8 billion in 2020 to RMB 20.8 billion in 2024, representing a compound annual growth rate (CAGR) of 8.9% [9] - The market is expected to continue its growth trajectory, projected to expand from RMB 22.6 billion in 2025 to RMB 32.9 billion in 2029, with an accelerated CAGR of 9.8% during this period [9] - Key drivers of this growth include increasing vehicle complexity, stricter safety and emissions regulations, and rising investments in research and development for new energy vehicles [10]

Group 1 - The core viewpoint of the article is that Zhejiang Hexia Technology Co., Ltd. has submitted a listing application to the Hong Kong Stock Exchange's Growth Enterprise Market, with Jinhui Capital as its sole sponsor [1] - The company has developed into a leading automotive testing solution provider in Zhejiang Province since its establishment and has collaborated with numerous leading domestic and international automotive and component manufacturers during the track record period [1] Group 2 - The company's automotive testing solutions include (i) automotive testing, (ii) testing system integration, and (iii) automotive component sales [3] - Since 2022, the company has expanded its automotive testing services to include ADAS testing, which integrates precision electronic systems in vehicles to enhance driving safety and comfort through the use of numerous sensors and camera technologies [3]

Core Viewpoint - Zhejiang Hexia Technology Co., Ltd. has submitted its listing application to the Hong Kong Stock Exchange's Growth Enterprise Market, with Jinhui Capital as its sole sponsor, indicating its ambition to expand in the automotive testing solutions sector [1]. Group 1: Company Overview - Zhejiang Hexia Technology has developed into a leading automotive testing solutions provider in Zhejiang Province since its establishment [1]. - The company has collaborated with numerous leading domestic and international automotive and component manufacturers during its track record period [1]. Group 2: Business Segments - The company's automotive testing solutions include (i) automotive testing, (ii) testing system integration, and (iii) automotive component sales [3]. - Since 2022, the company has expanded its automotive testing services to include ADAS testing, which integrates precision electronic systems in vehicles to enhance driving safety and comfort through the use of numerous sensors and camera technologies [3].

Core Viewpoint - Horizon Robotics-W (09660) has shown a significant increase in stock price, reflecting strong market performance and leadership in the ADAS sector [1] Group 1: Market Performance - Horizon Robotics-W's stock price rose over 3% in the afternoon session, currently trading at 8.16 HKD with a transaction volume of 12.67 billion HKD [1] Group 2: Industry Position - According to the latest report from the High-Technology Automotive Research Institute, Horizon Robotics holds a 47.66% market share in the ADAS front-view integrated machine and small domain control computing chip sectors, maintaining its position as the top domestic brand for two consecutive years [1] Group 3: Product Development and Partnerships - The Horizon Journey 6B chip is rapidly penetrating the ADAS market, with products developed by Bosch and Zhixing Technology based on this chip already securing contracts with automotive manufacturers [1] - Collaborations with leading Tier 1 suppliers such as NavInfo and Continental have also resulted in over 10 contracts with automotive brands, further solidifying Horizon Robotics' competitive advantage [1]

Core Insights - The autonomous driving chip market is experiencing a significant concentration of market share among leading players, with Horizon Robotics dominating the ADAS market with a 47.66% share, followed by Mobileye [1] - The high-end autonomous driving computing chip market is set for explosive growth in 2025, with urban NOA vehicle deliveries in China reaching 2.0709 million units, a year-on-year increase of 155.83% [1] Group 1: Market Dynamics - The overall market is showing a "Matthew Effect," where leading players are gaining significant advantages, particularly in the high-level autonomous driving market [1] - Horizon Robotics has secured over 10 partnerships with major automotive brands, further solidifying its market position [1] Group 2: Competitive Landscape - In the urban NOA chip market, the top three players—NVIDIA, Huawei, and Horizon—hold a combined 90% market share, with NVIDIA leading by approximately 26% over Huawei [2] - Horizon Robotics is rapidly increasing its market share in the urban NOA segment, thanks to the mass production of its Journey 6M/6P chips [2] Group 3: Future Outlook - The high-end autonomous driving market is expected to undergo significant changes in 2026, driven by mature end-to-end technology, improved product experiences, and decreasing costs [2] - Companies that adopt an integrated hardware-software approach are likely to gain long-term competitive advantages, as they can leverage synergies between chips, algorithms, systems, and ecosystems [2]

Financial Data and Key Metrics Changes - Net sales for Q3 2026 were $229 million, representing a 7% sequential increase and a 29% year-over-year increase [12][13] - Non-GAAP earnings per share (EPS) were $0.15, an increase of 15% sequentially and 114% year-over-year [15] - Gross margin was 49.9%, up 30 basis points sequentially, and operating margin was 15.4%, an increase of 150 basis points compared to Q2 [12][15] - Adjusted EBITDA was 20.1% of sales, indicating strong operating leverage [12] Business Line Data and Key Metrics Changes - Automotive sales increased by 6% sequentially and 28% year-over-year, with e-mobility sales growing by 46% year-over-year [12][13] - Industrial and other sales increased by 11% sequentially and 31% year-over-year, driven by data center growth [12][13] - Distribution sales increased by 11% sequentially and 39% year-over-year [13] Market Data and Key Metrics Changes - Sales by geography: 30% in China, 27% in the rest of Asia, 17% in Japan, 15% in the Americas, and 11% in Europe [14] - Data center sales established a new quarterly record at 10% of total sales, up 31% sequentially [7][12] Company Strategy and Development Direction - The company is focusing on growth in ADAS, xEV, and data center markets, with significant design wins in these areas [5][6] - A new isolated gate driver IC for silicon carbide transistors has been released, targeting the data center power supply market [8][10] - The company is conducting a robotics roadshow to capitalize on industrial opportunities, confirming new wins in the robotics sector [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in automotive growth, citing strong bookings and backlog, particularly in xEV and ADAS [31][42] - The company anticipates Q4 2026 sales to be in the range of $230 million to $240 million, representing a 22% year-over-year increase [17] - Management noted that inventory levels in automotive remain lean, with no significant increases observed [32][43] Other Important Information - The effective tax rate for Q3 was 7%, and interest expense was $4.7 million [15] - Cash flow from operations was $45 million, with free cash flow at $41 million, or 18% of Q3 sales [16] Q&A Session Summary Question: Gross margin concerns - Management explained that gross margin was impacted by geographic and product mix, with expectations for improvement in the next quarter [21][22] Question: Sell-in versus sell-through dynamics - Management confirmed that sell-in and sell-through were close to equal, with expectations for them to remain balanced going forward [23][25] Question: Automotive growth outlook - Management expects automotive growth to be flat to marginally down in the next quarter due to Chinese New Year, but remains optimistic about long-term growth [29][31] Question: Data center business growth - Management indicated that the data center business is expected to grow, with current sensors and gate drivers contributing to future revenue [35][36] Question: E-mobility growth rates - Management projected a 16% growth rate for the e-mobility segment, driven by strong demand in ADAS and xEV applications [94] Question: Robotics market potential - Management discussed the potential for significant revenue growth in the robotics sector, with expectations for tens of thousands of units in the near term [96][97]

Financial Data and Key Metrics Changes - Net sales for Q3 2026 were $229 million, representing a 7% sequential increase and a 29% year-over-year increase [12][13] - Non-GAAP earnings per share (EPS) were $0.15, up 15% sequentially and 114% year-over-year [15] - Gross margin was 49.9%, an increase of 30 basis points sequentially, and operating margin was 15.4%, up 150 basis points compared to Q2 [12][15] - Adjusted EBITDA was 20.1% of sales, indicating strong operating leverage [12] Business Line Data and Key Metrics Changes - Automotive sales increased by 6% sequentially and 28% year-over-year, with e-mobility sales up 46% year-over-year [12][13] - Industrial and other sales grew by 11% sequentially and 31% year-over-year, driven by data center sales, which established a new quarterly record at 10% of total sales, up 31% sequentially [12][13][14] - Distribution sales increased by 11% sequentially and 39% year-over-year [13] Market Data and Key Metrics Changes - Sales by geography: 30% in China, 27% in the rest of Asia, 17% in Japan, 15% in the Americas, and 11% in Europe [14] - The data center segment accounted for 10% of total sales in Q3, up from 8% in the previous quarter [72] Company Strategy and Development Direction - The company is focusing on growth in ADAS, xEV, and data center markets, with significant design wins in these areas [6][11] - A new isolated gate driver IC for silicon carbide transistors has been released, targeting the data center power supply market [8][10] - The company is actively engaging in robotics, confirming high content opportunities in advanced humanoid robots [9][97] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in automotive growth, citing strong bookings and backlog, particularly in e-mobility and ADAS [31][42] - The company anticipates Q4 2026 sales to be in the range of $230 million to $240 million, representing a 22% year-over-year increase [16] - Management noted that inventory levels in automotive remain lean, with no significant increases observed [32][43] Other Important Information - The effective tax rate for Q3 was 7%, and interest expense was $4.7 million [15] - Cash flow from operations was $45 million, with free cash flow at $41 million, or 18% of Q3 sales [16] Q&A Session Summary Question: Gross margin and revenue guidance - Management explained that gross margin was impacted by geographic and product mix, with expectations for improvement in the next quarter [21][22] Question: Sell-in versus sell-through dynamics - Management confirmed that sell-in and sell-through were close to equal this quarter, with expectations for them to remain balanced going forward [23][25] Question: Automotive growth outlook - Management indicated that automotive growth would be flat to marginally down in the next quarter due to Chinese New Year, but expressed confidence in long-term growth [29][31] Question: Data center business growth - Management highlighted that fan drivers are currently the largest segment in data center sales, with current sensors and gate drivers expected to contribute significantly in the future [35][36] Question: E-mobility growth rates - Management projected a 16% growth rate for the e-mobility segment, driven by strong demand in ADAS and xEV applications [94] Question: Operating expenses and future guidance - Management indicated that operating expenses would see inflationary increases, but overall discipline would be maintained [46][47] Question: Current sensing technology - Management discussed the growth potential of current sensing technologies, emphasizing the transition from Hall-effect to TMR sensors [83][84] Question: Capital allocation and debt management - Management expressed comfort with the current debt levels and indicated a balanced approach to liquidity and debt repayment [87][89]

Group 1 - Citi has released a report indicating that Sunny Optical Technology (02382) is considering a spin-off of its automotive-related optical business for an independent listing on the Hong Kong Stock Exchange [1] - The automotive-related business includes camera lenses, camera modules, optical radar components, and products, which are expected to account for 17% of Sunny Optical's revenue in the first half of 2025 [1] - The report anticipates structural double-digit growth for the automotive business due to increased penetration of Advanced Driver Assistance Systems (ADAS) and trends in specification upgrades [1] Group 2 - The report suggests that an independent listing of the automotive-related business could provide a market valuation for this segment while Sunny Optical maintains its status as the controlling shareholder [1] - This potential spin-off is believed to act as a positive catalyst for Sunny Optical's stock price [1]