Lotus Technology Inc. Warrants 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and welcome to Lotus Tech first half of 2026 earnings call.

My name is Michelle Ma, the head of investor relations here at Lotus. With me today are the CEO, Mr. Qingfeng Feng, and the CFO, Dr. Daxue Wang. Our conference call materials were issued today and are available on our investor relations website. We are also broadcasting the call via webcast. Before we continue, please be reminded that today's discussion will contain forward-looking statements. First, with to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual future results may be materially different from the views expressed today. Further information regarding these presented uncertainties is included in Lotus Tech's relevant filings 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 unaudited GAAP financial information as well as unaudited non-GAAP financial measures. You can find a reconciliation of these figures in the press release available on our investor relations website at ir.group-lotus.com. With that, I'm delighted to turn the call over to our CFO, Dr. Wang, please.

Thank you, Michelle. Good morning, good day, and good evening, distinguished shareholders, analysts, and media friends. Thank you for joining our first half 2026 earnings release. Again, this is Daxue Wang, the chief financial officer of Lotus. I'm excited to brief you the audited financial results of the company. In the first half of 2026, the company delivered 3,904 units, representing a 39% year-over-year increase, outperforming the referenced traditional, premium, and luxury segments. This solid delivery performance reflects the company's growing market presence and competitiveness, particularly in the high-end automotive sectors. Strong delivery growth directly drove revenues up 23% year-over-year to $268 million for the first half of 2026, with strong momentum in the China market. Average selling price dropped slightly by 3% year-over-year, attributable to an increased sales mix of the lower priced Eletre X.

Gross profits rose 47% year-over-year to $226 million, while gross margin expanded 1.6% to 10%. This improvement was supported by a favorable product mix following the successful launch of the Eletre X, Lotus' first-ever PHEV in its 78-year history, marking the early validation of our multi-powertrain strategy. To maintain our disciplined cost management trajectory, the operating loss narrowed 63% year-over-year to $95 million in the first half of 2026. This improvement stems from the rigorous financial management, better operating leverage, and a one-off licensee refund linked to the product pipeline adjustments. Excluding these one-off items, the operating loss narrowed 26% year-over-year to $195 million, demonstrating the company's ongoing focus on driving operational efficiency and upholding a strict financial discipline. In May 2026, we unveiled our Focus 2030 strategy, which Ms. Feng will address in her remarks.

These improved financial outcomes serve as tangible proof of our progress against core pillars of Focus 2030, namely our multi-powertrain strategy and commitment to financial discipline, which are translating into measurable operational and financial advancement. In the first half of 2026, lifestyle vehicles deliveries made up 77% of company's total vehicle deliveries for the period, driven largely by the successful market introduction of the Eletre X in China. China market deliveries grew 60% year-over-year, keeping China as the company's largest market and accounting for 58% of total deliveries during the period. Deliveries outside China rose 17.4% year-over-year, including 45% growth across the Americas and 164% growth in ROW. European deliveries fell 17% year-over-year amid intensifying competition in the luxury BEV segment.

In Europe, we will continue to refine inventory management, enhance product value, and enforce pricing discipline to protect residual values and rebuild momentum. Eletre opened for orders across mainland Europe on June 3rd, with customer deliveries commencing in the fourth quarter. U.K. launches will follow in mid-2027. We expect this new model to fuel delivery growth over the upcoming quarters. China market deliveries expansion outpaced overall growth across China's premium passenger vehicle segment. This result underscores the strong inherent competitiveness of the Lotus full product portfolio, even amid mounting competition across the board for the auto industry. Now let's move to the half-year financials. Overall, our first half 2026 financial performance improved meaningfully versus the prior year period. As already covered deliveries, revenues and gross margin, I will not repeat them here.

In line with revenue, costs of revenues for first half 2026 stood at $242 million, up 21% year-over-year. As a result, gross profits reached $26 million, a 47% year-over-year increase. Operating expenses during the period came in at $127.5 million, down 46% year-over-year, primarily comprising the following. R&D expense stood at negative million U.S. dollars in the first half due to the aforementioned one-off item. Stripping out of this specific special one-time adjustment, R&D expenses totaled $96 million, a modest 4% year-over-year rise versus $92 million in the first half of 2025, driven by technology investment for the Eletre X. Selling and marketing expenses increased to $83 million, up 5% year-over-year. The uplift reflects higher sales commissions tied to rising vehicle volumes alongside marketing activities for the Eletre X launch in China and the pre-launch campaigns in overseas markets.

General and administrative expenses decreased to $46 million, down 27% year-over-year, as we tightly controlled travel, agency and other costs and optimized our organizational structures. With the above, even excluding one-off effects, the operating expense to revenue ratio improved from 107% in the first half 2027 to 84% in first half 2026, reinforcing our priority to lift operational efficiency and maintain strict cost controls. Accordingly, operating loss and net loss for the first half 2026 narrowed 63% and 52% respectively. On a non-GAAP adjusted basis, adjusted EBITDA loss for the first half of the year narrowed 57% to $104 million, compared with the $240 million loss in the same period last year. Beyond headline metrics, I would like to emphasize that we have delivered sustained operating expense reductions through the value-driven initiatives. This reflects our continued focus on cost optimization and operational efficiency.

By looking ahead, we aim to advance towards profitability and create long-term shareholder value by maximizing product positioning, expanding margins via optimized product mix, and executing rigorous cost reduction actions. With that, I will hand over to Ms. Feng. Thank you very much. 现场的各位朋友，大家好，我是Lotus CEO冯擎峰。感谢大家参加Lotus Technology 2026年上半年业绩发布电话会。上半年公司实现了核心经营指标的改善，并逐步落地了我们发布的Focus 2030战略规划。接下来我将向大家详细介绍。 Good day.