Lotus Technology - Earnings Call - Q4 2024
April 22, 2025
Transcript
Operator (participant)
Thank you for standing by and welcome to the Lotus Technology Inc. Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Demi Jiang, Head of IR. Please go ahead.
Demi Jiang (Head of Investor Relations)
Thank you, Dorothy. Good morning, good afternoon, and good evening, everyone. Thank you for joining Lotus Tech's Fourth Quarter and the Full Year 2024 Earnings Call. This is Demi Jiang, the Head of IR at Lotus Tech. I'm very honored to introduce Company Management with us today, CEO Qingfeng Feng, and CFO Daxue Wang. On today's call, we'll start with prepared remarks from CFO and the CEO first, and then kick off the Q&A session. Before we continue, please be reminded that today's discussion will contain forward-looking statements pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and forward-looking statements involving current risks and uncertainties. As such, the company's actual results may be material and different from the view expressed today. Further information regarding risks and uncertainties is included in relevant filings of Lotus Tech with the U.S. Securities and Exchange Commission. The company undertakes no obligation to update any forward-looking statements except as required under applicable law. Please also note that our earnings press release and this conference call will include disclosure of non-audited GAAP financial information, as well as unaudited non-GAAP financial measures. Please refer to our press release, which contains a reconciliation of unaudited non-GAAP measures to comparable GAAP measures, which you can find at ir.group-lotus.com. With that, I'd like to turn the call over to our CFO, Mr. Wang, please.
Daxue Wang (CFO)
Thank you. Hello. Distinguished shareholders, analysts, and members of the press, thank you very much for joining our Q4 and Full Year 2024 Earnings Release. My name is Daxue Wang, Chief Financial Officer of Lotus. I would like to take this opportunity to brief you on the financial results of the company. In 2024, the company delivered over 12,000 vehicles, reflecting a year-on-year increase of over 70%. For the fourth quarter, over 4,500 vehicles were delivered, representing a 20% year-on-year increase. We consider this as remarkable growth, considering the global trade uncertainties and economic slowdown. As for the revenue, although the fourth quarter result was narrowed by 12% year-on-year to $272 million, the company gained a 36% year-on-year increase to $924 million over the full year. Another achievement we want to highlight is we have achieved a reduction in operation expenses for five quarters in a row through rigid execution of efficiency enhancement plans. I would like to further break down our sales by category and by region. It turns out that the lifestyle vehicles increased by 57% year-on-year and accounted for 57% of the total deliveries as well. By region, Europe, the home of Lotus brand, continued to expand with a year-on-year increase of 180% and contributed nearly 40% of the total deliveries. China is the second-largest market for Lotus, contributing one quarter of the total deliveries. North America, mainly the United States, surged by 415% in 2024, making up 21% of the company's total deliveries. The rest of the world regions represented 15% of the total, with a nearly 90% year-on-year growth. For your attention, in the fourth quarter, we started to deliver Emeya in Malaysia, Thailand, Singapore, UAE, and the Philippines. For the key financial indicators, deliveries and revenues have been just reported. I will not repeat here. The cost of revenues increased to $895 million and $301 million for the full year and for the fourth quarter, respectively. As a result, the gross profit margin was lower to 3% for the full year and negative 11% for the fourth quarter. We reported an operating loss of $786 million for the year and $189 million for the fourth quarter. Net loss was accrued to $1.107 billion for the full year and $441 million for the fourth quarter. For your information, adjusted net loss under the non-GAAP measures were not much different. I'll stop here and hand over the speaker to Mr. Feng.
Qingfeng Feng (CEO)
[Foreign language]
Hello everyone, I'm CEO of Lotus Tech, Feng Qingfeng. Allow me to share our key achievements in the year of 2024.
[Foreign language]
Our performance overall is better than the broader luxury market. We have ranked the top among British luxury car brands with over 12,000 vehicles delivered in 2024, a 74% increase compared with our performance in 2023.
[Foreign language]
Currently, we have four models under delivery. We have one SUV, one sedan, or rather GT, and two sports cars, including Emira and also Evija.
[Foreign language]
Last year, we kept exploring our international footprint. We have entered into more than 10 countries in GCC region, Asia, and Oceania.
[Foreign language]
In addition to that, we have also been keeping cost reduction and also efficiency improvement, and we've been achieving operating expense reduction for five consecutive quarters.
[Foreign language]
Besides, we have also launched our Theory 1 concept car. This is a revolutionary concept car made with sustainable materials to redefine luxury, and we have gained wide recognition from our press friends.
[Foreign language]
For this particular vehicle, it has defined our direction for future models, particularly on its design language and also its sustainable principles.
[Foreign language]
As for our progress on ESG, we were honored as highly commended at Lotus Sustainability Awards 2024, leading the EV industry within Lotus' Vision 2045 campaign. Lotus was the winner of the 2024 EUCCC Sustainable Business Award and the Green Apple Award for outstanding environmental practices. Our sustainable supply management case was also included in Shanghai Climate Week 2024 Climate Tech In Focus report, and this report was also released at COP29.
[Foreign Language]
As for our recent development in 2025, we have already delivered more than 12,000 vehicles in the first three months, and as for the sales at the end, we have already delivered more than 2,000.
[Foreign language]
In the past, Lotus in China was called the English pronunciation of Lotus, and we have to use NYO as part of our logo. But in January 2025, we have successfully reclaimed the proprietary rights of Lotus' iconic logo, Lotus' wordmark, and the Chinese character of Lotus, 莲花, in China, ensuring consistency in terms of its trademark across the world.
[Foreign language]
In addition to that, we have also made a model facelift for our Eletre and Emeya. Specifically, in February, we have refreshed the lineup of those two models with upgraded configuration and competitive pricing. In China, the vehicle has been delivered starting from February, and in Q2, the delivery will also commence in the EU and the rest of the world.
[Foreign language]
Besides, we have also launched a mapless urban NOA navigation on autopilot in 16 cities across China in February this year. The system can effortlessly achieve lane-changing, seamless transition between highways and city roads, U-turns at intersections, intelligent lane selection, and smart obstacle avoidance. Starting in February, we have also started our OTA to push this function to our end customers. This system can make our vehicle able to deliver door-to-door intelligent driving.
[Foreign language]
Starting from quarter two, this function will be available in more than 100 cities in China through OTA.
[Foreign language]
In March this year, Lotus' intelligent driving arm, Lotus Robotics, has also established a strategic partnership with CaoCao Mobility to launch an innovative intelligent mobility platform for Robotaxi. We have also started the pilot operation in the city of Hangzhou and the city of Suzhou.
[Foreign language]
In addition to that, Lotus Technology's Natural Capital Assessment project was also included in World Economic Forum report, which demonstrated our ambition and also our progress in sustainable development, particularly on luxury vehicles.
[Foreign language]
On April 14, 2025, we have received the exercise notice from Geely requiring Lotus Tech to purchase 51% of the acquisition interests in Lotus UK, according to the put option agreement dated January 31, 2023, between the parties.
[Foreign language]
If we can exercise this put option, we will be able to operate on two factories: Hethel factory in the UK and Wuhan factory from China. Those two factories can cover four regions: Middle East, APAC, Europe, China, and North America.
[Foreign language]
As for the exercise of a put option from Geely, Lotus expects to acquire 50% of acquisition interest in Lotus UK through a non-cash transaction based on pre-agreed valuation methodology. Upon completion, Lotus will gain control over Lotus UK and consolidate its financial results. The strategic transaction will enable the company to integrate all global business under Lotus brand.
[Foreign language]
Subject to potential regulatory approvals, the acquisition is expected to be completed in 2025.
[Foreign language]
As for our product pipeline, Evija is our hypercar. It has a limited offering of 130 vehicles globally. We have already started the delivery of this hypercar.
[Foreign language]
Moving on to our Emira sports car, the US market is the biggest market for Emira, and this vehicle has also been available for global other markets. This year we are going to launch a model year 26 for Emira. It will be dedicated to the US market and also meet the compliance requirements for other markets. In 2027, we are planning a major uplift for Emira. It will have more horsepower. It will also be compliant to EU 7 emission requirements.
[Foreign language]
As for our lifestyle vehicles, Eletre and Emeya, previously I briefly mentioned about this, that we have already commenced delivery in China for model year 2026, and the delivery for EU, UK, and the rest of the world will also start in quarter two.
[Foreign language]
At the end of this year, in other words, at the end of 2025, we are planning to launch a PHEV. We would call it a hyper-hybrid model. This model will start delivery first in China in quarter one next year.
[Foreign language]
In 2027, we are also planning another new model, and by adding this new model together, we would be able to deliver our vision of a Vision 80 strategy. In other words, we will have six models in total.
[Foreign language]
That's all I'd like to share with you. Thank you.
Thank you, CEO and CFO. Dorothy, we are ready for Q&A. Please.
Operator (participant)
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kevin Koehler from Tier One Systems. Please go ahead.
Kevin Koehler (Analyst)
Hey, good morning, everyone. Thank you for taking my call. I'm calling as a Lotus investor, as someone who opened an exotic car dealership here in California about 11 years ago, and most of all as a car enthusiast. Basically, really my question is, is there any plan? It seems like you have a really amazing opportunity with the Emira to create something that would be highly in demand here in the US market, which would be something that's lighter weight than currently exists right now in the Emira, maybe adding carbon ceramic brakes, carbon bucket seats, some other things to remove a couple hundred pounds, and also increasing the horsepower and redline on the V6, which is an amazing engine. It sounds great. If you look at Porsche, they really have kind of created the recipe that everyone else, I think, should follow. If you look at what the GT3s and the GT3 RSs sell for, I mean, they're going for $100,000 over MSRP right now. They're almost impossible to get. I'd be curious to know, do you have any plans of creating just really a hardcore, maybe an Emira R with a high-revving V6, manual transmission, lightweight? I think that would do amazingly well here in the US market.
Qingfeng Feng (CEO)
[Foreign language]
Thank you for your question. I think it's a brilliant suggestion. In fact, the US is the largest market of Emira. Almost 50% of Emira sales are all coming from the US, and particularly our V6 model is very much preferred by our US consumers.
[Foreign language]
We are very clear that our US consumers would prefer an engine or model with higher horsepower and higher RPM. As a matter of fact, we have another model available in the US market, the 2.0 Turbo model. It also has relatively high horsepower. At the very beginning, we were quite concerned about our US consumers that they may only prefer the V6 model instead of the 2.0 Turbo model. However, after our consumers test drove the 2.0 Turbo model with also 400 horsepower, our consumers have very much liked it, particularly with its powertrain system, 8DCT transmission, and very fast response.
[Foreign language]
As for V6, we, to be honest, do not have the plan to further increase its power because this engine will not be compliant for EU 7 emission. However, we are investigating a new powertrain system, which is a V8. It will have a bigger horsepower, and we are currently investigating the feasibility of a V8.
[Foreign language]
Actually, this year in Europe, we have launched some limited edition with less weight, like the suggestion that you mentioned, that we put more carbon fiber materials on it. We will consider to see if we are going to launch similar models in the U.S. market.
[Foreign language]
Thank you for your passion for Lotus. Also, thank you for your great suggestions.
Kevin Koehler (Analyst)
Thank you very much. Appreciate it.
Operator (participant)
Thank you. Your next question comes from Laura Lee from Deutsche Bank US. Please go ahead.
Laura Lee (Analyst)
Hey. Well, thank you for taking my question. My first question is about the ADAS revenue. What's its contribution over the last year? And any update on the guidance? Any new design when you're working on? Yeah, that's my first question.
Demi Jiang (Head of Investor Relations)
Thank you, Laura. I will invite the CFO to give you an answer. Her first question is on the revenue guidance.
Daxue Wang (CFO)
Yeah. So you mean for 2025, right?
Demi Jiang (Head of Investor Relations)
Yes.
Daxue Wang (CFO)
Okay. So this year, we have a detailed plan. This is going to be like we have improvements compared to 2024. Let's say we are waiting for the further improvement from the board of directors.
Demi Jiang (Head of Investor Relations)
Thank you. Laura's second question, I remember, is the question on the revenue on the robotics.
Daxue Wang (CFO)
For this year?
Demi Jiang (Head of Investor Relations)
For 2024.
Daxue Wang (CFO)
2024.
Demi Jiang (Head of Investor Relations)
A few more colors. Yeah.
Daxue Wang (CFO)
For the robotics, we can achieve improvement compared to the one year before. We gained not only the internal revenue from the Lotus, we also gained some customers from outside of the company and also outside from the Geely Group. Overall, we've achieved $22 million from the customers outside the Lotus. Meanwhile, our profit margin, I think we have a pretty high margin compared to the sales of goods. Meanwhile, we are going to be able to keep this number in this year. I think, basically the revenues from the robotic side.
Laura Lee (Analyst)
Okay. Okay. Gotcha. Appreciate it. My second question is around the margin trajectory. As you mentioned, for this year and 2026, are there any headwinds or tailwinds on a year-on-year basis we should consider? And also thinking about the tariff situation, are there any changes on production arrangements that you're considering?
Demi Jiang (Head of Investor Relations)
Thank you, Laura. Her first question is on the margin trajectory for this year and the next year. Also considering the tariff situation, is there any changes?
Daxue Wang (CFO)
So I think the margin is going to be much improved this year compared to last year. Last year, first, there were trade uncertainties. We also had the stock, so it's exactly the stock clearing plan, which caused our profit margin to be lower compared to the year before. But this year, I think, firstly, the stock plan is going to be much over, and we no longer have these stock clearing requirements. Meanwhile, we have a much better product cost structure. So that means our gross profit margin is going to be much better than 2024. So that's my expectation for 2025.
Qingfeng Feng (CEO)
[Foreign language]
[Foreign language]
[Foreign language]
Laura, excuse me, do you mind repeating your last question on the tariff? Sorry, your voice was very far away.
Laura Lee (Analyst)
Yeah. So the second part is around the impact of tariff and any mitigation you're considering, changes on production arrangement orof solutions.
Demi Jiang (Head of Investor Relations)
Thank you.
Qingfeng Feng (CEO)
[Foreign language]
Definitely, we have been affected by the US unbelievably high tariff, particularly for our lifestyle vehicle, which is produced in China. For our lifestyle vehicle, we have already stopped its export into the US market. However, our sports car, which is produced in the UK, has not been affected yet. We are still investigating the market, and also we are still doing analysis.
Laura Lee (Analyst)
Okay. Gotcha. Yeah, that's helpful.
Demi Jiang (Head of Investor Relations)
Thank you, Laura.
Operator (participant)
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Yui Xiang from MSIM China. Please go ahead.
Yu Xiang (Managing Director)
Hi. Thank you for taking my question. I have two questions, actually. First one is, what are the contributing factors behind the significant decline in gross profit in the fourth quarter of 2024? And how much did the intelligent driving and the Bespoke service contribute to the service revenue and the gross profit in this fourth quarter?
Demi Jiang (Head of Investor Relations)
Thank you, Royce. We invite the CFO to answer.
Daxue Wang (CFO)
So basically, the fourth quarter performance, as you can tell, we have seen some decline. It's because we cleared the stock. Meanwhile, because of the uncertainties from the tariff, meanwhile, for the intelligent driving business, there is an accounting rules change because we changed the booking policy from the cash basis to the accrual basis in the fourth quarter, which resulted in some accounting adjustment in the figures. You can tell from the fourth quarter of the revenues from the services, you can see the change. Basically, starting from this year, we are already under the new accounting policies, the gross margin is going to be recovered. Meanwhile, particularly in the service sector, we are going to align the intelligent driving business with the industry benchmarks. Thank you.
Yu Xiang (Managing Director)
Okay. Thank you.
Qingfeng Feng (CEO)
[Foreign language]
Also, I'd like to comment on that. In 2025, our gross margin is going to be greatly improved due to our launch of Model Year 26. As I previously elaborated, the Model Year 26 will be launched in Europe, including the EU and the UK in Q2. And those two markets actually accounted for more than 40% of our total sales. So by launching Model Year 26, it can help us to improve our gross margin.
Yu Xiang (Managing Director)
Okay. Thank you. I have a second question: what is the revenue and profit margin of the intelligent driving business in the past year, 2024? And any guidance for this following year, 2025, and midterm revenue and profit margin for vehicles and/or the comprehensive service, respectively? What is the plan to improve the margin? That's my final question. Thank you.
Daxue Wang (CFO)
The benchmark margin for the intelligent driving business is about 30%. So it's in line with the industry standards. And starting from this year, we are going to not only improve the margin, also we are going to get more clients, more business from the market. So I think they are going to further lower the cost, thereby increasing the profit margin.
Yu Xiang (Managing Director)
Okay. Thank you.
Demi Jiang (Head of Investor Relations)
Thank you, Royce.
Operator (participant)
Thank you. Your next question comes from Tom Liu from Sunrise Capital. Please go ahead.
Thank you for taking my questions. Up to you. The first one is, what's the cash burn right now, and how long is the runway? Is there any significant financing we can expect in the next six months?
Daxue Wang (CFO)
As you can tell from our financial performance, we do have the gap in terms of the cash. Meanwhile, we are making the cash gap feel through the operation, through the investment plan, through the financing. We have been closely contacting the institutional investors in the market. So please take a close look at our announcement and also the company release. Thank you so much.
Demi Jiang (Head of Investor Relations)
Tom, do you have another question?
Yes. My second question is about the management capabilities. So we've noticed the recent management shifts. Would you mind sharing the rationale behind and what makes the current management team the right one to turn around a luxury company? Thank you.
Qingfeng Feng (CEO)
[Foreign language]
As for recent management change, we do have the welcome to a new CFO, Wang Daxue. He had rich experience in finance and also capital markets. In addition to that, he also had great performance in Geely.
[Foreign language]
Another thing I'd like to comment on is about the change of the head of sales in China. We have introduced a new China sales president, Qingpei Ji. He had also rich experience in luxury products, particularly with Volvo. During his time with Volvo, he helped the Volvo sales volume increase from 80,000 to 90,000 to more than 180,000 to 190,000. A significant jump.
[Foreign language]
Overall, I just want to say that for our entire management team, we have seasoned and also rich experience when it comes to luxury brand management.
[Foreign language]
As for Ms. Mao Jinbo, she previously had really rich experience with Benz and also Lincoln. Now she is responsible for close coordination of sales and operation and brands and marketing collaboration, covering regions such as the EU, US, and APAC. The ultimate target is to ensure One Lotus consistency.
[Foreign language]
As for our Chief Brand Officer or Chief Creative Officer, Ben Payne, he still remains at this position. He created a lot of brilliant content for us, and also the sensational concept car Theory 1 that I previously mentioned is also created by him.
[Foreign language]
As for our head of sales in the US, he was COO of Maserati. So he can bring us a lot of great experiences that he previously gained.
Thank you.
Operator (participant)
Thank you. There are no further questions at this time. I'll now hand back to Ms. Jiang for closing remarks.
Demi Jiang (Head of Investor Relations)
Dorothy, do you want to remind everybody how to raise their questions if there are any more?
Operator (participant)
Yes.
We have a couple of minutes left.
Once again, that is star one if you wish to ask a question. That's star one on your telephone. Thank you. We have a question from George Tang from Elson Capital. Please go ahead.
George Tang (Analyst)
Hi. Good morning. Thanks, everybody, for your time this morning. I have three quick questions for management. First question is, can management currently get a high-level guidance on how the put option will impact the company's financials, such as the balance sheet, cash flow, and P&L? It appears there's a pretty high debt-asset ratio of over, I believe, 130% by the end of 2024. How will the acquisition change that number? Thank you.
Demi Jiang (Head of Investor Relations)
Thank you, George. I will first invite CFO to give you some color on the question.
Daxue Wang (CFO)
Regarding the execution of the put option, we are still due to due diligence and talking with the dialogue with Lotus UK. I think we are going to release the result when it's done. As for the funding you just mentioned, it's going to be a non-cash deal. It's not going to bring the cash burden to the company. Overall, I think the answer to our question, we can wait until we finish the investigation and we get the deal done. Please take a close look at our further notice. Thank you very much.
George Tang (Analyst)
Perfect. Thank you. I have another question, perhaps this has been burning in the back of many people's minds, but I was wondering, what is Lotus's US strategy, market strategy, given the current geopolitical tensions and tariff situation? Having said that, what do you think would be your target sales for US market in this year? Thank you.
Demi Jiang (Head of Investor Relations)
Thanks, George. I will invite the CEO to answer your question.
Qingfeng Feng (CEO)
[Foreign language]
Yes, in 2025, it is going to be tough, but particularly we are affected by our lifestyle vehicles are mainly affected by the tariff hike. As for our sports cars, we were slightly affected. So we haven't actually changed our original plan for our sports car sales in the U.S. We expect about roughly 200 to 300 sales loss because of the tariff in the U.S.
[Foreign language]
We're also exploring our paths and the solutions for the US market. Because the US market is the biggest market for luxury premium vehicle segment, in addition to that, Lotus also has relatively high brand awareness in the US market. So definitely, US market will be one of our priorities. In addition to that, we will also keep exploring our feasibility of exporting lifestyle vehicles to the US market. At this moment, we will not be able to disclose any details, but please feel free to stay tuned to our future announcements.
[Foreign language]
The only thing that I may add is that manufacturing in the US could be one of our potential solutions.
Operator (participant)
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll now pause a moment to allow for any final questions to register. There are no further questions at this time.
Demi Jiang (Head of Investor Relations)
Thank you, Dorothy. Given the time constraints, I think we will conclude the call very soon. Everyone, thank you very much again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes the call. Have a very good day, everyone, and thank you very much again. Bye.
Operator (participant)
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.