EHang Holdings (NASDAQ:EH) Q2 2020 Earnings Call

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

0:35 Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial result for the second quarter of 2020. We released the result early today. The press release is available on the company's website as well as from Newswire Services. On the call with me today are Mr. Hu Huazi, Chief Executive Officer, Mr. Edward Xu, Chief Strategy Officer, and Mr. Richard Liu, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made on the safe harbor provision of the U.S. Private Security Litigation Reform Act 1995. Forward-looking statements involve inherent risks and uncertainties.

1:24 As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filing with SEC. The company does not assume any obligation to update any forward-looking statement, except as required under applicable law. Also, please note that unless otherwise stated, all the figures mentioned during the conference call are in Chinese R&B. With that, let me now turn the call over to Mr. Hu Huazi, our CEO. Mr. Hu was speaking Chinese. Then our CSO, Edward, will translate his comments into English. Please go ahead, Mr. Hu.

2:11 Thank you, Julia. Hello, everyone. Thank you for attending our telephone meeting today. In recent months, everyone should have a feeling that the pandemic and geopolitics have had a more profound impact on the global economy. But here I want to thank our team for their efforts in the past few months to keep our company's business stable. Our total income for the second quarter is RMB35.7 million, which has increased by 62.7% in total. The net profit is RMB20.6 million, which has increased by 60% in total. What I want to emphasize here is that in such a big environment, The sales of E-Hang 216 exceeded the level of the same period last year. As the only technology company in the world to achieve commercial delivery of smart driving aircraft, technology is our core competitiveness.

2:57 We rely on the flight platform of E-Hang 216 to achieve the rapid customization of air rescue and fire, and solve the problems of high-level extinguishing in the field of fire, and fill the blanks in the field of fire. Not only does it achieve the rapid customization of products, We have achieved a lot of breakthroughs in management in China and Canada, including the commercial license of the world's first aeronautical self-driving aircraft used in the air, and the special flight license issued by the Canadian Civil Aviation Bureau to us. We re-evaluate and adjust the strategy of the global target market based on the impact of the epidemic and the risk of geopolitical policies. In addition to Asia, We will continue to develop the Chinese market and expand our investment in the European market.

3:49 Although we are cautious about the situation of the global epidemic, we are still full of confidence. In the future, we will see more major releases coming to the market. These releases will break our limit of more than 100 kilometers. It will make our market even broader. I believe that our continuous efforts to innovate will make our development even more successful. We are confident that we will achieve 200% of our annual income growth. Next, let me introduce our Chief Strategist, Edward Xu.

4:29 Thank you, Mr. Hu. And hello, everyone. My name is Edward, CSO of Yihang. Let me first translate what Mr. Hu said in his opening remarks, and then I will talk about our key business strategies going forward. Thank you, Julia. Hello, everyone. Thank you for joining us on the call today. It's widely known recently the COVID-19 pandemic and geopolitics have brought a huge impact on the global economy. But our business continued a stable growth in the second quarter of this year. I would like to express my gratitude to my team for their endeavors. Our total revenues were 35.7 million RMB, an increase of 62.7% year-on-year.

5:23 Gross profit was 20.6 million RMB, an increase of 60% year-on-year. It is worth mentioning that under this environment, sales volumes of Ehang 216 exceeded the level of the same period of 2019. As the world's only AAV company that has achieved commercial deliveries, technology is our core competency. Relying on the Ehang216 platform, we have rapidly developed customized solutions for aerial rescue and firefighting, solving the problems of high-rise firefighting by fulfilling the gap of aerial firefighting.

6:09 We have not only completed the development of the new model quickly, but also rolled out it to the market rapidly. We have also made several remarkable regulatory breakthroughs in China and Canada We obtained the world's first commercial pilot operation approval for passenger-grade AAVs for air logistics in China as well as special flight operation certificates from the Transport Canada Civil Aviation Finally, due to the COVID-19 pandemic We re-evaluated our global marketing strategy in order to minimize the geopolitical risk and further enhance marketing opportunities.

6:55 Notably, Europe is our most important region after Asia, and so was the focus of changes. We established a new regionalized marketing management team, deploying local talents to accelerate market development. Going forward, we will put more efforts in the Chinese market and also enhance business developments in the European markets. We remain confident but cautious about the COVID-19 situation globally. We expect to roll out more new products, including the one with a flight range of over 100 kilometers, opening up more market opportunities.

7:41 We believe 200% revenue growth is achievable as our continuous efforts in innovation lead to stronger development. So those were Mr. Hu's remarks. Now let me cover some of our business achievements in this quarter. As Mr. Hu just mentioned, we made a number of breakthroughs on the regulatory front, which is a key for progress in the AAV industry. We were the first company approved to use passenger-grade AAVs for air logistics. With this approval, we will start a trial air logistics operation using the Ehang 216. We will do commercial pilot operations in the category of 150 kg plus heavy lifted cargo transport between ground and hilltop, and between shore and island at the customer site in Taizhou.

8:38 This approval was based upon a pioneering regulation for specific unmanned aircraft under the globally recognized Specific Operation Risk Assessment framework of the Joint Authorities for Rulemaking of Unmanned Systems Starting from this air logistics trial in Taizhou, we intend to gradually expand this application to more locations in China This is an important milestone for EHAM as it enables us to accelerate the commercialization of AAV technology and air mobility solutions We believe this will benefit the long-term development of UAM applications Another exciting regulatory breakthrough was the EHAM 216 obtained a special flight operation certificate issued by Transport Canada Civil Aviation Notably, this permit was the first of its kind permit for the periodic operations of passenger-grade AAVs in North America This fully demonstrates our leading position in the global AAV market It is a positive signal from global regulators to establish a supportive and sustainable regulatory environment for the UAM industry In smart city management, Yihang completed the deployment of a command control

10:12 center in the city of Hezhou in China. This center was a third of its kind after those in the cities of Shaoguan and Niengang. This deployment demonstrates our ability to build this type of a sophisticated centralized command control system designed specifically for urban air mobility uses. More importantly, It also shows our strong commitment to further expand and scale our business. To demonstrate our AAV technologies and used in a smart city management, in April 2020, we participated in a flood emergency response exercise organized by the local government in Shaoguan, China.

10:58 In this exercise, large-scale AAV operations were conducted efficiently and autonomously. As a supporting partner, Yi-Han responded quickly by sending 10 remotely managed AAVs to four emergency sites. This exercise fully demonstrated the real application of our AAV technologies in an emergency situation. It also showed our ability to further explore new uses with efficiency and effectiveness. Moving to our business expansion, the increasing market demands and our strong commercialization ability of AAVs are driving us to expand our production and upgrade our manufacturing capabilities.

11:49 With the local government's support, we are going to build a new AAV production facility in Yunfu city of Guangzhou province in China. The facility will include an R&D center for air mobility solutions and a training center for operations and technical talents with its initial annual capacity of 600 units. We are excited with our facility expansion and we expect it to further support the growth of air mobility business in China. Looking at air tourism services in May 2020, Yihang partnered with Shenzhen-listed tourism platform company Lingnan Holdings to develop the world's first UAM-themed hotel at the Lingnan Garden Hotel in Guangzhou, China.

12:42 A variety of air tourism services using Yihang AAVs are planned for the hotel, such as aerial sightseeing, transportation, air logistics, and air media light shows. We are excited to establish such a meaningful collaboration which not only broadens the uses of AAVs but also develops a new commercial use case for EHAM by providing customers a brand new interesting experience of air tourism Finally, I would like to announce the appointment of Mr. Dongming Wu CEO of DHL Express China as an independent director of EHAM We are greatly honored to welcome Mr. Wu who has over 30 years of valuable experience in the global delivery and logistics industry We believe Mr. Wu will help our strategic development especially in air logistics and further enhance our corporate governance To conclude, we continue to deliver solid performance in this quarter despite the difficult market conditions.

13:58 We are optimistic about the long-term promise of the UAM industry and we believe our first mover advantage will enable us to drive robust growth in the near future. Thank you.

14:14 Thank you, Edward, and hello to everyone on the call. Before I go into details about our financial results, Please note that all numbers presented are in RMB and presented changes refer to year-over-year comparisons, unless otherwise specified. Detailed analysis is contained in our earnings press release, which is available on our IR website. I am going to highlight some of the key points here. We achieved significant revenue growth again this quarter, quite an achievement considering all the uncertainties and challenges. Total revenues were 35.7 million, up 62.7%, growing across all revenue streams. Our core business of air mobility solutions represented 63.5% of total revenues. Sales of the Yihang 216, the company's flagship passenger-grade AEV, reached 16 units compared with 14 units in Q2 2019.

15:15 Gross profit in Q2 was 20.6 million, up 60%. We maintain a high gross margin of 57.6%, a slight 0.9 percentage point lower than that of Q2 last year. The slight margin fluctuation is mainly due to change in revenue mix. Adjusted operating expenses excluding share-based compensation increased by 41.9% to 35.4 million. As a percentage of total revenues, it was 99.2% as compared to 113.8% in Q2 2019. The increases were mainly due to higher R&D expenses related to the continuously strengthened product development efforts and additional G&A expenses related to public company operations and provisions in light of COVID-19 involvement.

16:11 As revenue continues to grow, there is operating leverage that supports our path towards operating profitability. Adjusted operating loss in Q2 slightly decreased by 6% to 11.1 median and adjusted operating margin improved by 22.8 percentage points from negative 54% to 31.2%. The comparison of adjusted net loss is in line with that of adjusted operating loss. Looking at our balance sheet on cash flow, we ended the quarter with roughly $258 million in cash, cash equivalent and short-term investments. Overall, the financial results in Q2 were solid, with significant revenue growth and stable high growth margin despite the COVID-19 pandemic.

17:03 Now let's turn to the outlook. We maintain our forecast of at least 200% growth in annual revenues in 2020 based on the current momentum in economic recovery and the expectation of no further major interruptions impacted by the COVID-19 pandemic. The company is confident in its long-term growth outlook given the growing number of practical uses for AAVs in the global UAM market, especially in China. With that, we conclude our prepared remarks for today. Let's now open the call for questions. Operator, please go ahead. Thank you. Ladies and gentlemen, we will now begin the question and answer session.

17:49 If you wish to ask a question, please press star 1 on your telephone and white for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, ladies and gentlemen, It's star one for question. Our first question comes from the line of Team Xiao from MS. Please go ahead.

18:17 Hi, Mr. Hu, Richard, and Edward. Thanks for the call and also taking my questions. So just three quick questions. The first one, I think Mr. Hu just mentioned we are seeing some recovery across the board. So could you probably quantify or provide some updates as the recovery pace of the domestic market and also the overseas? And my second question is about more like the supply chain hiccup because I think during our past few calls, we mentioned during the COVID-19 pandemic, there's more like the supply chain bottleneck or disruption. So Just wondering if that has all been back to normal and do we need to pay additional like probably the additional upfront payment to secure the component supply.

19:11 And my last question is about a new project because I think Edward just mentioned about the new cooperation project about firefighting. And on top of the project Edward just shared, Where can we expect more significant progress or where can we start monetizing those projects? Those are all my questions.

19:32 Thank you. Okay. Thank you, Tim. So, let me answer your first question. The first question is about the recovery pace of overseas operation, right? So, and the impact on both domestic, right? So basically, you know that this COVID-19 pandemic is quite a big surprise. And at the beginning, I think we see more impact on the domestic side, but now it's switched to the overseas market. So our focus is more on the European side, the European market. But we also have some clients in North America, such as the ones in Canada,

20:21 and also the ones in Japan and Korea.

20:26 So I'll start with Europe first. Right now we are monitoring the situation and we see still lockdowns or travel restrictions in some of the European countries. That means that there are some Thank you for your attention. because for this year we are trying to penetrate the European market with our drone light show performance business.

21:12 So right now we are happy to see some breakthroughs with the progress going up. And also as you are aware of the recent permit we have obtained, in Canada and also in Norway. So we believe that if the COVID-19 pandemic gradually disappears, we're going to see the big progress in those markets because so far we have obtained the flight permit from those authorities. So I think that's very important.

21:59 because without the permit, we are able to do more demo flights in those markets. For example, we are actually planning a number of flights in Europe in the next 30 to 40 days in Europe, such as in Linz, which is the third largest country in Austria, and in Rotterdam, and others. So actually we see those markets with good enthusiasm in our project. And also I just want to mention that just recently we delivered 216 to Japan.

22:50 and we are also getting a new order from Korea. I think in North Asia, those markets are new breakthroughs for us. So we are happy to see that, you know, to make a new progress in those North Asia markets. So overall, we think that the COVID-19 pandemic is definitely negative for our overall market expansion, but We still see the good opportunity with good client interest in those markets. So we are hopeful that after this pandemic getting under control, we should be able to expand in those markets quickly.

23:36 Thank you. And this is Richard. I will take your second question. So basically, At this moment, we see our supply chain should be in a safe situation. Based on the experience from the early days of the pandemic, we have built up some safe level of some key component and materials. And we believe this will help us to strengthen our supply chain capability. And in addition, we also continue to enhance our relationship and working more closely with some key suppliers. And going forward, as I mentioned earlier, if there will be no major interruption, our supply chain should be OK.

24:36 Yes, as regarding to the third question, it's about our new version of the firefighting AAV, which was just released at the end of July. I think that was very interesting product for this year. And actually, the release of this project is a bit delayed.

24:58 You know, it's due to this pandemic thing. But we're happy that it got finally released.

25:05 And immediately after the release, actually we got a very strong interest, especially from the government side. So far we have a secured order of several units to Yunfu government already. And actually today we are attending this emergency equipment show in Guangzhou. So we attended this show with very good client interest as well. So we are hopeful that this can be a new driver for our sales for the next 12 months. Because why? We think that this is a very unique solution for high-rise firefighting. Because understand that the latest, the best, most advanced technology and others with a height limit of only 120 meters high. So for any skyscrapers above that level, there is no better solution.

26:14 So basically, there is nothing that can reach that level. However, with our AAV, our 216, Yihang 216, Firefighting AAV. It can fly up to the level of 500,600 meters high. And with the bombs that can break the glass, it can release the carbon dioxide. And also, we've got a very strong extinguisher that can put out the fire. So we did a very successful exercise with the fire department. in Yunfu government. So I think this got widely recognized by the government officials. So far, we are in cooperation with the Ministry of Emergency in China, and the different Thank you. Our next question comes from the line of Vincent Yu from Needhome and Company.

27:16 Please ask your question.

27:40 Hi, management. Thanks for taking my question. And I have a few questions. The first question is about the new product categories. So as we have explored new use case such as the firefighting and air ambulance for the 216 model. And then you also just mentioned that we are working with the national emergency like department What are some other use cases you think are nice fit for our model and also easy reach that we are paying attention to? Second question is about the case you mentioned to work with the hotel in Lingnan.

28:26 What kind of revenue or revenue sharing model we have on that case? And third question is about our order book Is there any comments you guys can share on next year's order book as we are entering September, or what kind of goal we have for next year, if it is available to share? Thanks.

28:52 Okay. This is Richard. I will take your first question. So basically, our experience is like that. After we start a commercial delivery of our EH-216, we have customer feedbacks from different backgrounds. And all these new use cases are actually results of related customer feedback, which represent the practical needs. And interestingly, the ranges required are typically around 10 kilometers. which are nicely fitting to the current capability of eHung 216.

29:37 So eHung 216 has become like a product platform. And on this platform, more practical use cases can be further developed and deployed. So basically, in addition, what you have known as aerial sightseeing, There are other use cases which some customers are in discussion with us for potential orders, such as aerial logistics, aerial emergency transport and rescue. As Edward just mentioned, there are interests from the emergency management department or ministry in China.

30:29 and other potential use cases could include aerial island hopping, aerial cargo transport in harbors, and for nearshore marine platforms such as offshore oil rigs, sea wrenches, et cetera. And probably Edward can take the second question.

30:53 Okay, thank you. The second question regarding our cooperation with Linan Group, right? So understand that Linan Group is SOE, is a platform company of the Guangzhou government. This is a conglomerate. It is a very large group with a business segment in the tourism, in hotel, in food processing, and restaurants. et cetera. So it's a very big group. It has a small branch which is listed in Shenzhen Exchange Market. So basically this is a very credible large SOE group. And so basically our cooperation, our partnership is based upon different aspects of our project.

31:39 For example, for the 216AEV It's going to be the sightseeing. So we're going to provide the tourism sightseeing service in their Lingnan Garden Hotel, which is a very nice hotel situated in Lansha in Guangzhou. So this is going to be the first model, first cooperation between our company and the Lingnan Group. So after the successful operation of this business, We are going to replicate the two other luxury hotels operated by Lingnan Group. And we also are going to cooperate in the light show business. For example, we are going to provide the drone light shows for the Lingnan Group to celebrate the holidays in their hotel and in their you know tourism spots and you know amusement parks etc so we basically we signed a large framework agreement to provide such services and finally we are also talking about the providing the logistic services to them because they own a large chain of these food for the processing and the restaurants. And so they are going to have the centralized kitchen to send the food to different restaurants. So it's an interesting

33:10 project that we may use our drones to deliver the food for them. So, you know, for such a big group, there are so many different aspects that we can cooperate on. So it's very exciting for us. So far, we are just testing the first project. And so basically, we're going to provide the service. So at this stage, we're not talking about the sale of the equipment yet. We are talking about the potential service. We're going to operate the AAVs for them, and then we can get paid for the service. Thank you.

33:51 And I'm going to take your third question. So basically, we are aggregating potential business leads for the increasing number of use cases. But sorry, we don't have a special number right now to share with you. But it is expected that next year, we will continue to achieve significant growth as we are at the early stage of a huge new market. And we are probably the only supplier in the market and there are more use case opportunities to be developed.

34:29 Got it. Thank you very much. Thank you. Our next question comes from the line of Joseph O'Sher from JMP Securities. Please go ahead.

34:43 Thank you and good afternoon. I have two questions. First, you had talked a little bit about the longer range 100 kilometer I'm wondering if that simply requires a larger battery pack or what other innovations you might be looking at to increase the range. And secondly, I was particularly interested in the Canadian regulatory approval. I was wondering if you can discuss a little bit what that use case is, if it's tourism or firefighting or something else. Thank you.

35:23 Okay, thank you for your question. Right now, I think it's tricky because we have not officially released this 100-kilometer range product yet, but since our CEO, Mr. Huazhi, is so excited to talk about this, that's why we can say that within our pipeline, we actually have a number of new things in our pipeline, but this This definitely will be a very interesting one because right now as you can see that our 216AV that can sustain at 21 minutes flight with about 35 kilometers.

36:09 Some people say that this probably is not enough for some longer range travel. So that's why it's just a trigger our interest in exploring the longer range product. And what we can tell you that this new product is pretty much ready for release. It's already in good shape. And it can still carry two passengers. It can fly a much longer range. And so we think that can be another driver for our new business in future. Thank you.

36:53 This is Richard. I'm going to take your second question. So basically the approval we got from the Canadian authorities, it is approval to allow our partners in Canada to conduct trial flights. in a period of time, not just for one time. It's for a period of time. This is a breakthrough for the authorities in North America to issue relevant approval or permit for this new category of airway vehicle for a period of time. If I remember correctly, it is until next April. So from now until next April, our partners in Canada can conduct tri-flight with our EHON 216s.

37:42 And you probably know that partner just now. Ed will also mention a little bit. It is United Therapeutics. They have a base there, and they will So basically the potential use case is a typical medical emergency transport to transport organs for transplantation.

38:19 That's very interesting. May I ask a follow-up question? Yes, please go ahead. Do you believe that there is potential for air tourism business in the Canadian or North American market?

38:41 Yes, of course. Because, you know, in North America, they're very rich in tourism resources. There are so many beautiful scenery sites, definitely. So, but, you know, the major... the bottleneck or hurdle is regulatory restrictions. We think we made very good progress in getting this approval by the Canadian authorities and also in January this year we did a demo flight in North Carolina. That was a very good milestone we have achieved so far.

39:26 So if we can get a further permit or clearance from the government, definitely we will see a huge market potential. Because right now we actually see a lot of clients in North America approaching us, asking us how to sell our unit and launch our operation in North America. Yeah, first thing is due to this, you know, pandemic thing. And the second is we are working on this permit, right? So, but we definitely see very strong market demand and with a real interest in those markets.

40:11 So, yeah, so we remain very optimistic about those markets. Thank you.

40:19 Thank you very much. Thank you. Our next question comes from the line of Damon Donnelly from Equitas Fund. Please ask your question.

40:32 Hi. Thanks, guys. Just a quick question. I was wondering if you could add any detail on the goals of the EMS, emergency medical services, drone projects that you're working on. Second question. What's the roadmap look like for logistics and the partnership with DHL? Are there any major milestones for that in 2021? And for the 100-kilometer range drone, is there any color you can add to the technical achievement in terms of how that's being achieved? What kind of batteries or...

41:19 How are you going from 35 kilometers to 100 kilometers? It's a pretty major milestone.

41:30 Sorry, let me just clarify your question. So first question is about emergency medical service, right? Yes. The data, right?

41:44 Yeah, what are the goals for that? Like, are you expecting, you know, I don't know whether you are aware of a press release we did just several days ago during the weekend.

42:13 So we just got invited by the IQ, International Organization of Aviation Authorities. So we got invited by them to join a very interesting project of this Ambula. Ambula project means that IQ is going to design a very smart autonomous air ambulance So we are very privileged to be invited to participate in the project by contributing our technology, our motors, engines, et cetera. So definitely that shows the recognition of our project.

42:59 And as you can see from our website, we just did some video clips on our website showing what we did during this China's You know, the anti-pandemic situation in early of this year? Yes, because our autonomous air vehicle which is controlled by the computer can land very accurately and safely on the rooftop of the hospitals so actually you can see from that video and we did the transportation of the medical supplies from the ground to the hospital and this is very safe because you know given that the disease can be very contagious so with no stopped within this vehicle, so it just eliminated the risk of being contacted, right? So, yeah, we actually have made this product in a very good shape, and so I think the IQ's project of this embryo just opened another door for us to expand our project in the global market.

44:21 Is the goal for that project to transfer patients or people going to ER or is the goal not that ambitious?

44:35 Sorry, I cannot hear clearly.

44:38 Is the goal for that project to transfer patients in emergency situations or is it not for paramedics?

44:51 Oh, yeah, so our AAVs are designed for both goods and the passengers and the patients. So basically, our AAV can carry passengers. And meanwhile, if you don't carry passengers, you can also carry medical supplies or even organs, as our clients are planning. and the blood, for example, for emergency situation. So it has a very good applications in real life.

45:32 Second question is, what's the roadmap look like for the logistics use cases for 2021?

45:38 You mean in 2021 for logistics?

45:49 Yeah, for DHL partnership or anything else?

45:53 DHL partnership, okay, okay. Yeah, so for DHL partnership, we are in good cooperation with them. I think, but so far, we are still in early stage because From a VHO perspective, they have a lot of very sophisticated demand. For example, we are not going to design the drone for them. We are going to design the whole solution. That means we're going to provide the drones plus the smart box. The box can automatically charge the drone and also shelter the drone and also can sort the parcels automatically.

46:40 and also we're going to deploy the facilities in different places. But so far the project is going so far so well. So we are close to the end of the phase one of our cooperation. within this or next week. So actually we made very good progress in phase one. So after that we are going to move to phase two. So that means we are going to have more real application use cases. So I think this is an ongoing project and both sides showing good interest and enthusiasm in it.

47:25 So far, yeah, we are happy about our cooperation so far.

47:33 Thank you. And the final one was just how have you extended the range from 30 kilometers to 100 kilometers? Is there new battery technology in there or is there anything you can add to that achievement?

47:56 Yeah, so I think everyone shows very good curiosity. So I would keep this as a secret right now because it's not time for us to release it. And once we release it, you are going to be surprised. So, yeah, stay tuned. Thank you.

48:19 Thank you. Thank you. I'll find a question that comes from the line of Vijay Rakesh from Mizuho. Please go ahead. Vijay, your line is open. Please go ahead.

48:42 Yeah, sorry. Hi, Richard. On the call, you mentioned ES2116. You had 16 units. Just wondering what the geographic breakdown of those sales were, Asia versus Europe, et cetera. And... Number two, on the two European countries, can you elaborate a little bit more about those countries and what the applications are, cargo or logistics? And the last one, number three, I think you mentioned Japan and Korea's new markets. What applications are you seeing there? Thanks. Okay.

49:24 Sorry, we missed your first question. Can you say it again?

49:29 The ES2116, the 16 units on the quarter, just the geographic breakdown, how many of these units were for mainland China versus, or Asia versus Europe versus North America?

49:42 So, BJ, you're referring to the second quarter, right?

49:51 Yeah.

49:53 Okay, so for the units of 216 we showed in Q2, they are all in China. Thanks.

50:07 So Edward? Yes, so your second question is regarding the two European countries for what, for the operation?

50:18 Yes, you mentioned Rotterdam and one other country.

50:21 Oh yeah, actually we are going to fly in three countries, one in Linz of Austria, which is third largest country in Austria, third largest city in in Austria, and so we actually have been talking about this project for a long time, both parties, and because this is also introduced by our partner of FACC, so we're going to do a demo flight there. So Linz is a very beautiful city with a beautiful river, so we're going to fly across the river. And what in Rotterdam is about the port, because the local port authorities are very interested in our project. And because normally it takes a very long time for them to transport the sea crews from the vessel to the harbor. It is very expensive and very time consuming. So by using our AAVs, hopefully this can help them to improve the efficiency.

51:32 And yeah, also another potential client in France is also inviting us to fly in France as well. So we are actually planning a number of demo flights in the upcoming month. And your final question is about the market in Japan and Korea, right? So in Japan right now it's a private company. is a private company who purchased our AEV and they are going to operate in Japan just for sightseeing. But right now, due to this pandemic thing and travel restrictions, We are unable to launch the flight there, but we are going to fly in Japan very soon after this situation getting better. And in Korea it's also similar because I think it's the local governments who are interested, show the interest in our project, in our AUV.

52:45 and place order for AAV. Actually, in Korea, it's going to be multiple demo flights in different cities. I think with successful demo flights in Korea, it's very hopeful that we can open up new markets there.

53:11 And the application in Korea?

53:15 Yeah, in Korea it's more about this urban transportation and the tourism.

53:22 Thanks. Right, thank you. We are now on top of the hours of this earnings conference call. If you have more questions, please reach out to us via email. Now let me turn the call back to Mr. Liu for closing remarks.

53:44 Thank you, operator. Thank you all for participating on today's call and for all your support. And we appreciate your interest in our company and look forward to reporting to you again next quarter on our progress. Thank you. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect. Thank you.