ECARX - Q1 2023
June 12, 2023
Transcript
Operator (participant)
Good morning, everyone. Welcome to our first quarter 2023 earnings conference call. With me today are ECARX Chairman, CEO, and Co-founder, Ziyu Shen, Chief Operating Officer, Peter Cirino, and Chief Financial Officer, Ramesh Narasimhan. As a quick reminder, this call is being recorded. Before we begin the prepared remarks, which will be followed by Q&A, please note that we may refer to both GAAP and non-GAAP measures. Today's discussion also contains forward-looking statements based on the environment as we currently see it. As such, does include risks and uncertainties. Please refer to our filings with the SEC for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to hand the call over to Ziyu.
Ziyu Shen (Co-founder, Chairman, and CEO)
Thank you, Adam. Hello, everyone, and welcome. Thank you for joining our Q1 earning call. Before I dive into the financial results for the first quarter, I'd first like to recap a few elements of our global strategy and progress. ECARX is ideally positioned to capture share in a large and rapidly evolving market, with an estimated TAM of $470 billion by 2030, supported by our differentiated full-stack technology that simplifies and expedites OEM product development timelines. We see a clear path for accelerating growth over the next five years as we expand our reach beyond our current client base of 12 OEMs and 21 vehicle brands. We have a solid strategy in place to achieve double-digit revenue growth, adjusted EBITDA profitability, and a strong free cash flow generation, while remaining disciplined in our capital allocation.
Our focus remains on expanding revenue streams by partnering with global OEMs to meet their evolving needs, increasing average revenue per car through innovation, continuing to invest in R&D, and accelerating collaborations with cutting-edge partners across the globe. With that, I'd like to give you the highlights of our financial performance during the first quarter, which Ramesh will go into in great detail later. We saw revenue of over $111 million for quarter one, up 16% compared to the prior-year period in a challenging market environment. This growth was largely driven by an increase in new digital cockpit sales volume and a favorable sales mix with higher revenues per unit. Our focus on EVs is continuing to pay off, and we have great visibility into our revenue pipeline through the remainder of the year.
As we started to roll out products into vehicle brands, including Lotus, smart, Volvo, and Mazda. We achieved gross profit of $31 million, which was up more than 50% compared to the prior-year period, driven by increased content per car, new product launches, and a continued focus on sourcing efficiencies. Following our strong performance in 2022, we again saw significantly improved adjusted EBITDA in quarter one, as we reduced our losses by 48% compared to the prior-year period. Importantly, we remain on track to reach adjusted EBITDA profitability by the end of 2024. As we continue to grow, it is important to remember how we got here and what our purpose is. ECARX is a global mobility tech provider, working with OEMs to create new vehicle platforms from the ground up.
We are one of the only companies within the industry offering a unique vertically integrated full-stack solution that's including digital cockpit system, chipset solution, cockpit operating system, and an integrated software stack. These solutions and technologies, which are purely focused for the automotive industry, aim to combine multiple ECUs into a single computing platform, enabling OEMs to develop new applications, services, and revenue streams. We have a clear roadmap and are focused on further developing a fully integrated solution for software enabled vehicle of the future. With our joint venture with Arm, we were the first to launch a 7-nanometer automotive-grade SoC in China. As of April, our solutions have been integrated into around 5 million cars worldwide.
As we weaken to leverage our strong foundations to further expand internationally, seeing mass production and traction with mainstream OEMs like Volvo Cars, Mercedes-Benz, Mazda, and Porsche. Next, I would like to review some of the progress we made over the first three months of the year, which puts us in strong position for the remainder of the year, and emphasizes the power of the ECARX strategy and the playbook. In addition to making strong progress building out our team in London, we opened an R&D center on the West Coast of the U.S., and a sales and engineering center in Germany. We continue to focus on developing our international capabilities to capture growth opportunities in the rapidly growing EV market in North America and Europe.
Having showcased our cutting-edge technology and exclusive collaborations with partners such as AMD at the start of the year, we also unveiled our exciting new product lineup, which is already scheduled to be in production in the second half of the year with Volvo and the Lynk & Co. From a product perspective, we continue our automotive focused testing program with Super Brain to radiate this all-in-one four-stack solution, integrating the digital cockpit, driving, and vehicle controls. Peter will elaborate our product lineup in a few minutes. We are excited by the opportunities in the large and growing automotive tech industry, and the broad trends that we will further support strong growth for years and decades to come. We believe our cutting-edge solutions and strategic relationships will enable us to continue to capture new market share across geographies.
These growth drivers include, first, the shift toward always connected automatic EVs. Second, the rise of software-defined vehicle. Lastly, moving to a new platform dynamic that supports faster product development. Research conducted by McKinsey showed that the TAM of this market is expected to reach almost half a trillion dollars by 2030, and we plan to win more than our fair share of this amount. The rise of the software-defined vehicle is why Eric Li and I founded ECARX. As cars continue to evolve to become more complex digital devices with greater vehicle autonomy, and as drivers' expectations of their in-car experience increase, the demand for high-powered, seamlessly connected automotive focused compute platform expands significantly. Anticipating the clear directions the market was handling, ECARX turned its focus to EV models several years ago, and is well positioned to take advantage of the growth vertical.
With our unique product abilities, we are best positioned to help OEMs move from a distributed E/E architecture to a more centralized one, with increased computing power, offering a better driver experience. Additional benefits to OEMs, such as reduced wiring needs, increased development speed, low BOM costs, all leading to requiring fewer suppliers. Before handing call over to Peter, I want to thank all of our employees for the hard work and dedication to ECARX since our listing in December. We are excited by our results in the first three months of 2023, I believe we are well positioned to deliver on our guidance for the remainder of the year, given the industry trends transforming the automotive industry, and our own well-defined growth strategy. With that, let me pass the call over to Peter Cirino, our Chief Operating Officer.
Peter Cirino (COO)
Thank you, Ziyu. Good morning, everyone. One of the key drivers of growth for ECARX has been our focus on innovation. We continue to invest in research and development, and to introduce cutting-edge technologies and features in our products, which allows us to stay ahead of the market. We have a significant TAM opportunity ahead of us. Our clearly differentiated product line is designed to capture all segments of that growth opportunity. Our Antora series is designed to fulfill the need of powerful SOPs in high-volume vehicles in the growing EV market. Makalu, one of the most powerful intelligent cockpits available today, designed to push the boundaries of the driver experience with amazing 3D graphics, is powered by AMD and Unreal Engine. To power the evolution of autonomy and software-defined vehicles and the future of electronic architecture, we have our all-in-one central compute platform, Super Brain.
All these products are supported by Cloudpeak, our multi-pillared software system, which is featured in the new Volvo EX30. Let's switch gears to our product mix. All of our products are designed to be automotive grade, which in our view, is one of the key differentiators of ECARX compared to other industry players. Our Antora 1000 and 1000 Pro are designed to meet the growing demand for System-on-a-Chip in the EV and intelligent vehicle markets. They have a physical safety layer, or island, which runs independently and needs no virtualization. The Antora 1000 Pro uses SE-LINK to provide seamless connection for two Antora 1000 SoCs, effectively doubling the computing power. This will provide redundancy for more functions and features. In addition, this additional computing power increases the life cycle of the vehicle.
Makalu delivers high-speed gaming performance and supports the latest graphics processing interfaces of PC platforms, ideal for gaming, real-time 3D environment rendering, and spatial surrounding audio effects. It offers a very sophisticated in-vehicle experience. We are seeing real interest from OEMs for this product, and mass production rollout is expected to begin in early 2024. Following ECARX Makalu is the Super Brain central compute platform, which combines our SE1000 SoC with an advanced AD chipset. This product brings AI performance to its full potential. This is our all-in-one solution that we view as a super computing controller that integrates the cockpit, driving, and vehicle control with our full-stack hardware and software technologies. The Super Brain will lead to improvements in the performance and efficiency of the electronic architecture and drive the evolution from EVs to intelligent mobile devices.
Super Brain will also enable OEMs to reduce the wiring harnesses in the vehicle by 5%, cut vehicle engineering costs by 15%, and bring a 20% material savings when compared to distributed controllers. Finally, ECARX's Cloudpeak architecture is built to fully meet the functional safety and information security requirements of the vehicle. It supports multiple operating systems and the global mobility ecosystem. It meets national and international standards, it's compliant with the EAL4 certification. We work with many OEMs, directly serving 21 brands across Asia, Pacific, and Europe, we are continuously looking to diversify our customer base and our geographic footprint, as we have done recently with FAW and Mazda. For FAW, we will be supplying our Antora 1000 powered digital cockpit, which is planned for mass production by the end of the year.
Lincoln Co will be utilizing our Antora 1000 Pro with Flyme Auto for its new 08 model, launching in Q3. We recently announced the mass production of a customized intelligent cockpit product for Changan's Mazda CX-50 model based on our E02 platform. This E02 platform has already been deployed in around 800,000 vehicles across 26 separate vehicles from various OEMs, and remains a powerful intelligent cockpit computing platform. Finally, Cloudpeak, our digital cockpit software stack, will be integrated into the new all-electric Volvo EX30 SUV in their state-of-the-art infotainment system. In addition to our OEM customers, we also supply eight tier one automotive suppliers, including Visteon, Nosok, Baidu, and Desai. Our focus on developing an automotive tech platform is informed by our deep-rooted automotive knowledge and strategic collaborations.
We recognized early on that the best way to deliver great computing power and fantastic experience is to collaborate at the R&D development stage. As many of you know, we have agreements and strong relationships with cutting-edge companies like AMD, Arm, Epic Games, Volvo, and SiEngine, all to define the next generation of in-vehicle connectivity and take the digital customer experience to the next level. We remain excited about our wide industry partners and continue to seek collaborations with similarly innovative businesses to improve the cockpit experience and create meaningful differentiation of our product offering. Looking ahead, we continue to build ECARX into a market leader in the large and growing and rapidly transforming EV market. We continue to invest in our people and in R&D to create the innovative, and products, and services that meet the evolving needs of our customers.
Now I'll return the presentation over to Ramesh to review our financial results.
Ramesh Narasimhan (CFO)
Thank you, Peter, and good morning to all of you. ECARX's first quarter financial results came in strong, with our focus on growth and commercial success driving the numbers. We continued to see strong growth throughout the quarter, with the revenues up 16% to $111.1 million, compared to the prior-year period, in a challenging macro environment, where vehicle production in China fell 10% year-over-year in Q1. A testament to the continued strong demand for our products and our focus on the EV market. Our growth was driven by new digital cockpit sales volumes and the portfolio shift from IHU to DHUs. Our business remains robust, and we are confident of achieving our full-year revenue guidance of $700 million-$720 million.
The results for Q1 also reflect the seasonality of our industry and was in line with our expectations and is factored into the guidance for the year. Compared to the prior-year period, sale of goods revenue increased by 19%, and while software license revenue was up 140%. Service revenue was around $7 million lower, both driven by contract completions in the period. Gross profit was $30.7 million, up 52% compared to the prior-year period. This was mostly a result of an increase in content per car, favorable product mix, and a continued focus on sourcing and manufacturing efficiency, along with an increase in margin for software licensing. Adjusted EBITDA was -$17.4 million, a 48% improvement compared to the prior-year period, benefiting from higher margins and lower fixed costs while maintaining investment in core product development.
SG&A was 23% of revenue, up from 21% in the prior-year, as we continue our international expansion while keeping a tight control on costs. We finished the quarter with a cash of $148 million, up 31% compared to the prior quarter, which gives us a solid financial foundation and further strengthens our position in the market. This empowers us to continue to drive innovation, explore new markets, and seize strategic partnerships. Although I've presented this slide on previous occasions, it is crucial to emphasize the inherent seasonality within our business. This reminder is especially relevant as we anticipate a similar pattern this year, considering the planned launches of new products scheduled for third and fourth quarters. As you heard earlier from Ziyu, we have had a pretty full agenda so far this year.
Looking forward, we have a number of key milestones to deliver through the balance of the year, including a number of key product launches, seeing Antora 1000 and 1000 Pro on the road in a mass rollout for the first time, while we continue to expand our international footprint and enhance our engineering capabilities. We're also focused on diversifying the business in terms of our customer base and geography. Our first quarter progress on all these metrics gives us confidence in meeting our projections for 2023, and we are reiterating our guidance for revenue to be in the range of $700 million-$720 million, a 38% year-over-year increase at the midpoint. For adjusted EBITDA, we maintain our guidance of achieving breakeven by the end of 2024.
To summarize, we continue to see strong revenue growth and our new product introductions, including the Antora series, Makalu, Super Brain, Central Computing Platform, and Cloudpeak Software, have generated excitement among both our existing customers and potential prospects. These innovative offerings have positioned us as a leading player in the leading market. Both these factors signify our ability to stay ahead of industry trends and meet the growing demand for electric vehicles, which are expected to continue and serve as a strong tailwind for the years to come. We continue to strengthen the business by adding engineering capacity and by executing our commitment to diversify our customer base and revenues. Lastly, our financial performance continues to create a clear pathway to achieving adjusted EBITDA profitability by the end of 2024.
In conclusion, we continue to make significant strides in driving the business forward while benefiting from the secular adoption of electric vehicles and strong demand for our automotive-grade products. With a clear path to profitability, we are well positioned for continued success. With that, we would like to open up for questions.
Operator (participant)
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type it in the box and click Submit. Please stand by while we compile the Q&A roster. We will take our first question. The question comes from the line of George Gianarikas from Canaccord Genuity. Please go ahead. Your line is open.
George Gianarikas (Managing Director and Senior Analyst)
Hi, good morning, and thanks for taking my question. My first one is, just you've done an admirable job of navigating the headwinds in EV and auto demand globally. Can you just kind of give us a little bit more meat to the bone there and help us understand a little bit of what you're seeing in the marketplace and what gives you confidence in the second half ramp that you just articulated?
Peter Cirino (COO)
Yeah, George, thanks for joining the call today, and thanks for the question.
You certainly, you know, I think one of the strengths we have for ECARX is just a fantastic market that we participate in. You know, our segment of the automotive space continues to grow rapidly, and we see, you know, continuing strength in terms of demand for our products. About a number of years ago, Ziyu, our CEO, you know, had a focus primarily on electric vehicles, and I think that's providing a good tailwind for, you know, what we were able to achieve in first quarter and our continued visibility into the balance of the year. We've got a number of exciting launches.
We talked about the Mazda launch in our earnings call, additional launches with Lincoln that we announced, and our Cloudpeak software will be launching on the Volvo EX30 later this year. I think with, you know, the continued strength in electric vehicles and, you know, these launches, we are pretty confident in our continued progress through the balance of the year.
George Gianarikas (Managing Director and Senior Analyst)
Thank you. Just as a follow-up, completely different topic, more long-term in natures. Curious as to whether you can give us any update on Super Brain and particularly the SiEngine and the partnership there with Arm. Any update, any additional color you can share there would be very much appreciated. Also, whether or not you'd be open to other partnerships within the Super Brain ecosystem outside of the SiEngine? Thank you.
Peter Cirino (COO)
Yeah, certainly. I mean, we definitely see, you know, an advantage of ECARX is the technology ecosystem that we work with. Whether that's partnerships that we have with Arm and SiEngine, you know, Volvo Cars with HaleyTek on our Cloudpeak software, you know, AMD and Unreal in our Makalu product. You know, those partnerships continue to be, I think, a critical element of our strategy, enabling us to, you know, develop products quickly, you know, with the best technology and in a cost-effective way, and bring them to market. As we, you know, continue to work with SiEngine, I think one of the significant advantages this year is the launch of the seven-nanometer SoC. You know, we'll have that on vehicle in a matter of weeks here and continuing to ramp up fairly aggressively as we go through 2023 and 2024.
We're excited to see that product roll out. You know, partnerships will continue to be, you know, core to our strategy on a go-forward basis, I think both in the cockpit space and in the central compute space.
George Gianarikas (Managing Director and Senior Analyst)
Thanks a lot.
Operator (participant)
Thank you. We will take our next question. The next question comes from the line of Yuqian Ding from HSBC. Please go ahead. Your line is open.
Yuqian Ding (Managing Director and Head of China Autos Research)
Thanks, team. I've got two questions. First, on the R&D side, we're reading the in the results that we stopped the R&D of the ADAS perception. Could you give us a bit more context on it and break down the key R&D areas for us? Second, could you also update, if any other wing, especially from the non-Geely, Daimler, Volvo, other than these OEMs, any particular nationality or region we're being focusing on? How do we steer through the geopolitical tension that might get in your way, in terms of we breaking into these international OEMs sourcing system?
Peter Cirino (COO)
Yeah, sure. I'd be happy to address the question. I mean, we continue to invest very heavily in R&D. You know, we've got approximately 70% of our total headcount is engineering-focused. You know, as we looked at our internal investments, we felt that our partnership progress was, let's say, at a faster pace, and we chose to focus a lot of our ADAS activities on the partnership side. With our Geely Intelligent Vehicle partnership, as well as Zenseact and Luminar, that we've got close relationships with, we believe we have a very good offering to continue to grow in the ADAS space. It was a simple matter of adjusting our approach and making sure we're really utilizing the best, the best activities, and that's core to the way that we approach the business.
you know, relative to Volvo, I mentioned the EX30 launch is an exciting launch for us. It's a product that we'll have on vehicle later this year, that we integrate the Google Automotive Services into that product line. It's a global launch for ECARX, so as that vehicle ramps up, it'll be in almost all the world's markets. We continue to advance on a global stage, and we believe it's a great reference product that enables us to continue to make progress in the international marketplace.
Ramesh Narasimhan (CFO)
If I can just add on the R&D, you know, we continue to invest very heavily to ensure that we stay ahead of the tech curve. If you look at our spending, 60%-70% of our OpEx is primarily focused on R&D, and we'll continue to invest in R&D going forward as well. In terms of your second question, in terms of diversifying our revenue, we are continuously focused on that. We have established our international offices. We also have established engineering centers in both U.S. and in Germany, where we have establishing sales and engineering service centers, again, to be very close to potential customers where we're, you know, continuously having some very exciting discussions about future opportunities.
While we cannot, you know, mention any names today, it is something that as a business, we are very closely following up and implementing.
Yuqian Ding (Managing Director and Head of China Autos Research)
Got it. Thanks team.
Peter Cirino (COO)
Thank you.
Operator (participant)
Thank you. We will take our next question. The next question comes from the line of Ying Si from CICC. Please go ahead. Your line is open.
Ying Si (Equity Research Analyst)
Hello, thanks for connecting, and great congratulations to the results for quarter one. Actually I have four questions, so I'll just begin one by one. The first one is actually, we have noticed that the quarter one, the quarter one revenue actually took 14% of the forecast revenue for 2023. Could you help us to do a breakdown of, on the quarterly revenue for this year's revenue forecast? That's the first question.
Ramesh Narasimhan (CFO)
Sorry, I didn't really understand the question. Do you repeat that? You want a breakdown of Q1 revenue?
Ying Si (Equity Research Analyst)
Well, I actually want a breakdown on the quarterly revenue for this year, like, the second quarter, third quarter, fourth quarter. We have noticed that the revenue actually took a larger percentage if we go on the roads, reaching the end of the year, usually like 50% from the last year. Yeah.
Ramesh Narasimhan (CFO)
Sure. I mean-
Ying Si (Equity Research Analyst)
Could you give us a guidance on the percentage? Yeah, please.
Ramesh Narasimhan (CFO)
Yeah, sure. I mean, I think it's one of the key things that we addressed in our full-year earnings. In terms of the seasonality, we always find the Q1 to be the smallest in terms of the seasonality, and Q4 to be the strongest. We are not seeing anything different this year, which is consistent with what we have said in the past. You know, we have said in the past that Q1 is approximately about, you know, 16%-17%, Q2 in the range of about 20%, Q3, you know, similar to that, and then Q4, about 40%. That's what we are anticipating in 2023 as well, in that range, compared to the overall full-year revenue.
Of course, you got to overlay the fact that, as we mentioned earlier, we've got Q3, Q4 new product launches that will accelerate, you know, on top of the seasonality, so you have to take that into consideration as well. Typically, this is the seasonality that we see in the market.
Ying Si (Equity Research Analyst)
Okay. Thank you. Thanks for your question. My second question is like, for Antora 1000 Pro, as we have seen that it is launched in Lynk & Co 08 in quarter three. My question is that, could you help us do a forecast on the revenue that can be generated from this product in quarter three this year?
Peter Cirino (COO)
I mean, certainly we anticipate that we're confident that product will launch. We're working very closely with Lincoln Co. to make sure that it launches successfully in vehicle and then our supply chain lined up. We expect it to be the ramp this year. We've got additional launches in Antora 1000 or 1000 Pro across multiple brands next year. We don't disclose specific, you know, revenue by product line, but it certainly contributes to the ramp up we've seen the latter half of the year as required.
Ying Si (Equity Research Analyst)
Right. Okay, thank you for the answer.
Peter Cirino (COO)
Mm-hmm.
Ying Si (Equity Research Analyst)
Okay, that's fine. The third question I want to ask is that, how would you expect your service revenue and gross margin trends in maybe the coming year or the next two, three quarters?
Ramesh Narasimhan (CFO)
Yeah, I mean, the service revenue is very seasonal. I mean, when I say season, not based on calendarization, but it depends on contract completion. We, you know, that will be in line with contracts that we have got in place. As I said, overall, we are still, you know, very much focused on and confident on delivering the $700 million-$720 million, and we've taken into account the contracts or the service revenue that will come into play this year, within that. It is very clearly, you know, driven by a specific, you know, contracts that we've got in place.
Ying Si (Equity Research Analyst)
May we know what's the relative size of the contract, or is that clear currently?
Ramesh Narasimhan (CFO)
Well, it varies. It depends on the level of customization that we do for different, you know, OEMs. We obviously don't go into the details of what level of customization, because that would be, you know, revealing some confidential information, what to expect in future products. Yeah, the level of contracts is driven by what customer experience the OEM is wanting in its products and its product position.
Ying Si (Equity Research Analyst)
Okay, right. Thank you for the answer. For the gross margin trends, could you please elaborate on it?
Ramesh Narasimhan (CFO)
Yeah, I mean, you know, we got a gross margin of 28% this year overall. We are expecting that trend to continue, you know, through this year. Of course, in the second half, you know, we have new products coming through. Overall, I think for the year, we are expecting gross margin to be in that range.
Ying Si (Equity Research Analyst)
Oh, sorry, I didn't get your last sentence. it's around $0.25 for this year?
Ramesh Narasimhan (CFO)
Yeah, overall, we are expecting the gross margin to be in this range.
Ying Si (Equity Research Analyst)
Okay, right. Thank you so much. My last question is regarding the % of revenue generated from non-GD OEMs. Could you help us do a brief, like, elaboration on, like, the progress of ECARX getting the contracts from non-GD OEMs, and what are the revenues generated from these contracts, please?
Ziyu Shen (Co-founder, Chairman, and CEO)
Yeah, so this is Ziyu speaking. Thank you for the question. I think in quarter one-
Ying Si (Equity Research Analyst)
Thank you so much.
Ziyu Shen (Co-founder, Chairman, and CEO)
Yeah, in quarter one, we have already announced the FAW Group partnership. That's very significant milestone for us. We already got very confirmation from FAW Group for Antora series product collaboration. Also, two weeks ago, we announced Changan Mazda SOP launch. That's also a very important milestone for us for E02 platform. We're already in production long years. I think that is current, so we already disclosed the non-GD OEM partnership in it. Of course, the team is trying, working very hard at SKU, and we also have very strong confidence to distribute our technology to more and more Chinese domestic OEM and the global OEM together. Bye now.
Ying Si (Equity Research Analyst)
Hello? Hello, can you hear me?
Operator (participant)
It seems the participant has muted themselves. One moment.
Ziyu Shen (Co-founder, Chairman, and CEO)
Hmm?
Ying Si (Equity Research Analyst)
Hi, could you hear me?
Ziyu Shen (Co-founder, Chairman, and CEO)
Yeah, did you get?
Ying Si (Equity Research Analyst)
Hello, could you hear me?
Ramesh Narasimhan (CFO)
Yeah, we can hear you.
Ying Si (Equity Research Analyst)
Oh, great, thanks. My previous question is like, could you help do a rough estimation regarding the revenue, actually the portion of revenue that generates from non-GD OEMs, maybe by the end of this year? Is it possible to do this kind of estimation by this time? Thank you.
Ramesh Narasimhan (CFO)
Yeah, you know, as I said in the past, we will continue to drive the diversification of revenue by our customer base. You know, we certainly, you know, anticipate the diversification to improve, you know, as we launch new products in Volvo and as Ziyu mentioned, with FAW early next year. I think we take a longer term view in terms of diversifying our customer revenue rather than, you know, taking a 12-month view, because as you know, very well know, with automotive contracts in place, it takes, you know, about 24 months and sometimes even 36 months to implement.
What is really important is that we take a longer term view in terms of diversification objectives, rather than looking at it year-by-year. I think it is something that, you know, when we make announcements on new contracts, you will get to see more and more of customer base that where we have opportunity to diversify.
Ying Si (Equity Research Analyst)
Yeah, sure. Thank you for the answering. Totally understand. Yeah, that's all my questions. Thank you so much for the answer.
Ramesh Narasimhan (CFO)
Thank you.
Ziyu Shen (Co-founder, Chairman, and CEO)
Thank you.
Operator (participant)
Thank you. We will take our next question. Your next question comes from the line of Derek Soderberg from Cantor Fitzgerald. Please go ahead. Your line is open.
Derek Soderberg (Director and Senior Equity Research Analyst)
Yeah. Hey, guys, thanks for taking my questions. Wanted to ask, and maybe this question is for Peter. You know, if you could speak a bit more about the Makalu platform. You know, there's a lot of power in the solution. You know, curious if you can talk about what portion of the market is sort of ready for this level of computing power, and, you know, how you expect the Makalu ramp to play out, and then, you know, if you could just talk about the interest level and feedback around Makalu as well, that'd be great.
Peter Cirino (COO)
Hey, Derek. Good to hear from you. Thanks for the question. You know, we mentioned that we're working, you know, pretty aggressively on getting Makalu out in the market. We've already announced that that product will be launched late this year, early next year, as it ramps up. You know, in that launch, we will also use a lot of 3D environments, and we think that'll bring a great experience to the vehicle. Additionally, on top of that launch, we've also announced that smart will be adopting that globally, adopting the Makalu product globally for their brand. I think we're quite excited around both solutions as being, you know, fantastic user experiences that those OEMs will be able to bring to customer base.
You know, we're continuing to work with a number of different OEMs, to broaden the adoption of Makalu. I think that we do get some excitement around that product, especially with the 3D capabilities. I think we'll continue to talk about some exciting adoptions of that product as we go through next year.
Derek Soderberg (Director and Senior Equity Research Analyst)
Got it. That's helpful. Ramesh, you know, you guys have a pretty clear product roadmap that you spoke about during your Investor Day, and you guys are continuing to invest in R&D, and you've, you know, you've got these product launches coming. Can you talk about your cash position and, you know, how you feel about where that is for the year, you know, just as it relates to funding further growth? Thanks.
Ramesh Narasimhan (CFO)
Sure. Hi, Derek, good to talk to you again. Yeah, we, you know, started the year with $112 million in terms of cash. During the quarter, our cash balance actually improved, and we ended up at $148 million. I think, you know, it's, we have a very strong cash balance right now. We are comfortable that the business has got sufficient cash to support, you know, continuing investment in R&D going forward.
Of course, like any business, if there is a, you know, if we feel there is a need to raise further funding, then at that time, we will evaluate what options we have, you know, and make the decision going forward. Currently, we are very, very confident with the cash balances that we've got.
Derek Soderberg (Director and Senior Equity Research Analyst)
Got it. Thanks, guys.
Peter Cirino (COO)
Thanks, sir.
Operator (participant)
Thank you. We will take the next question. Your next question comes from the line of Shelley Wang from Morgan Stanley. Please go ahead. Your line is open.
Shelley Wang (VP of Executive Research)
Thanks for taking my question. I have two questions from my side. One is a follow-up on the customer expansion. When we supply to the non-Geely brand, may I know what's our, like, the competitive advantage comparing to our, like, our peers?
Peter Cirino (COO)
Yeah, sure. I'll take a shot at that. You know, we think that ECARX brings a number of advantages to the market, because we look at our capabilities. You know, first, we're, you know, between ECARX and the strong partnerships and joint ventures that we have, we've got the ability to deliver product from silicon to cloud services and in a fully integrated stack. You know, that enables us to understand the system and bring the best platforms into the market.
You know, being a pure play automotive company, you know, we've got experience in launching many vehicles and ensuring that our product line is very focused on the automotive industry and delivering advantages to the automotive OEMs, based on the knowledge, the system design, the system knowledge that we bring to play. With our relationship with the Geely brand, you know, we very much are there helping to craft the vehicle roadmap on day one when vehicles are born. This enables us to bring our technology into vehicles very quickly.
As we talk to future customers, we're often talking about products that are on the road and successfully delivering great experiences to customers and to the OEMs, and that, rather than talking about, you know, engineering prototypes and activities like that. Then lastly, we've got a very strong technology partnership ecosystem that we see ourselves as the center of and, kind of the architect of that system, and bringing technologies like we've talked about here with AMD, our joint venture with Arm, our joint venture with Halitech, where we're bringing the Google Automotive software into the vehicle and the Google Automotive Services.
We see, just to name a few, and we see this technology ecosystem as critical to the way that we're able to develop our systems and bring, you know, a fantastic experience into the vehicle.
Ramesh Narasimhan (CFO)
If I can just add a couple of points. You know, we see ourselves as leading in the leading market, and what that means is we are on top of the tech, driving a lot of innovation, so that's a critical competitive advantage that we've got. You know, we've also said that, you know, we believe we are unique in terms of the vertical integration. What that means is that we are very, very cost competitive when it comes to, you know, delivering advanced products, which I also believe is a very critical cost advantage that we have in the market.
Shelley Wang (VP of Executive Research)
Got it. Very clear. My second question is about the deep tech concern. We are seeing, like, the car makers in China, aggressively cutting retail prices this year. From my, like, our side, do we see, like, the, will car makers pass the cost pressure to us, like, asking for the price cut or use, like, a fewer intelligent cockpit features? What's our strategy if OEM comes to us for more price cuts?
Ramesh Narasimhan (CFO)
Yeah, I think, you know, it's very important to distinguish what ECARX offers versus traditional automotive components. You know, where we are seen as a value add differentiator from an automaker perspective. You know, it's not a traditional pricing negotiation. It is, what problem are we trying to solve for the OEM and what value add we bring to the table in terms of the digital customer experience? I think it's more a question of what we can deliver rather than more about a pricing pressure. You know, when we're not the traditional, you know, OEM customer who, you know, makes a bracket and we want it cheaper by another 10 cents. That's not the kind of conversations we have.
you know, it's really about enhancing the product value for the OEM and the customer experience ultimately.
Shelley Wang (VP of Executive Research)
Got it. Thank you very much.
Ramesh Narasimhan (CFO)
Thank you.
Peter Cirino (COO)
Thank you.
Operator (participant)
Thank you. We will take our next question. Your next question comes from the line of Xiaoyi Lei from Jefferies. Please go ahead. Your line is open.
Xiaoyi Lei (Senior Research Analyst)
Hi, good morning, thanks for taking my questions. I have two questions. My first question is on the industry front. How do you evaluate the impact on the value chain if Tesla rolls out FSD in China? My second question is with regard to your new S generation product, Antora 1000 Pro. As the integration of digital cockpit and ADAS functions on 1 chip seems becomes the new norm. I'm wondering, could you please compare your product with Qualcomm's recently released Ride Flex SoC in terms of the functionality as well as the pricing? Thank you.
Peter Cirino (COO)
Yeah. I'll take the first one. You know, relative to, you know, ADAS, we have got a tremendous amount of activity across all markets with in the ADAS space. You know, ECARX, I think, is quite excited with the developments that we're bringing to market, specifically with our Zeka joint venture. We're working, you know, very closely with that system, and we anticipate that we'll continue to make some great announcements in the future with how we bring that product forward.
You know, additionally, we've got a number of partnerships that we continue to have in place, with Volvo, Zenseact, and Luminar, and we feel quite confident in the way we're approaching the ADAS market and the developments that will take place there and the place that ECARX will play in that future. Then relative to the Qualcomm product line, you know, the...
I think when we look at the SoC roadmap for ECARX, you know, especially when you look at the Antora 1000 product and its direct competitor, the Qualcomm SA8155P, you know, there are a number of use cases where we see a significant advantage in the way that we've designed that system, and, you know, brought DDR5 memory into the vehicle and, you know, optimized the interfaces, there are use cases where we see up to a 30% performance enhancement versus the direct Qualcomm product line. I think we continue to believe we've got a strong roadmap in working with SiEngine to bring, you know, great SoCs that are both cost competitive and future competitive into the market.
Xiaoyi Lei (Senior Research Analyst)
Got it. That's very helpful.
Peter Cirino (COO)
Mm-hmm.
Operator (participant)
Thank you. We will take our next question. Your next question comes from the line of Suji Desilva from Roth Capital. Please go ahead. Your line is open.
Suji Desilva (Managing Director and Senior Research Analyst)
Hi, Ziyu, Peter, Ramesh, thanks for taking the questions. On the Super Brain central compute platform, I think you talked about some potential BOM savings, perhaps some wiring or so forth. Can you elaborate there on maybe how that compares to the competitors in terms of the advantage there?
Peter Cirino (COO)
Yeah, Suji, hey, great. Thanks for the question. Thanks for joining us today. You know, I think, you know, central compute has got the potential to unlock a lot of potential in the vehicle around savings from a BOM perspective, from a vehicle infrastructure perspective, and we're quite excited about the Super Brain product. You know, we're still we still have that product in development, so not yet on vehicle, but we anticipate that will come in the near term here. Then we'll, we anticipate we will have an official launch date, I would say, in the next 6 months-12 months. We're excited about the developments with that product and the potential that it, you know, can bring to the vehicle.
I think we've quoted that we, you know, we see significant savings from a electronic infrastructure perspective in the vehicle, both from consolidating additional ECUs together and creating savings from that perspective, as well as the wiring savings that we've quoted in vehicle that we would anticipate coming from that application as well.
Suji Desilva (Managing Director and Senior Research Analyst)
Okay, great. Thanks, Peter. Also, I was just curious on the, you know, in your attempt to diversify geographically, you placed your U.S. office, I believe, in California. I'm just curious on the, the thinking behind that location. Is it closer to tech resources versus the, where the car companies are? Just curious on that thinking. Thanks.
Peter Cirino (COO)
Yeah, sure. I mean, we're continuing to expand our footprint to serve customers effectively. We mentioned today, our engineering and sales center that will be ramping up in Germany and with hiring well on the way there. Our activities in California tend to be focused today on, you know, SoC IP development, and we believe that's a, you know, fantastic place for talent and driving, you know, effective capabilities in that space. We also see it as an opportunity to build from as we continue to approach potential customers in North America and hope that it serves as a launching pad for those activities.
Suji Desilva (Managing Director and Senior Research Analyst)
Okay. Makes sense. Thanks, guys.
Peter Cirino (COO)
Yes, thank you.
Operator (participant)
There seems to be no further questions, so would like to hand back for closing remarks.
Suji Desilva (Managing Director and Senior Research Analyst)
Yeah, if I can. Thank you very much. I just wanted to thank everyone for joining the call today. As we've mentioned, as a management team, we are very excited about ECARX growth story, and we're very confident on delivering the key milestones that we went through today. Once again, thank you for very insightful questions, and appreciate that. Thanks, everyone.