EHang Holdings generates 92.5 million RMB in Q3 2025, as delivery slowdown supports long-term growth strategy amid strong order backlog.

Good day, ladies and gentlemen. Thank you for standing by and welcome to the EHang third quarter 2025 earnings conference call. Please note that the Management's prepared remarks and the subsequent Q and A session will primarily be conducted in Chinese and the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenience purposes only. In case of any discrepancy, the management statement in the original language will prevail. To listen to the original remarks by Management, please join the Chinese line. Additionally, both Chinese and English lines are open for questions and today's call is being recorded. Now I will turn the call over to Ann G. Ehang, Senior Director of Investor Relations, Ms. Ann Please proceed.

Thank you all for joining us on today's conference call to discuss the Company's financial results for the third quarter of 2025. The earnings release is available on the company's IR website. Please note the conference call is being recorded and the audio replay will be posted on the company's IR website. On the call today we have Mr. Huang Zhihu, our founder, chairman and chief executive officer, Mr. Zhao Wang, chief operating officer and Mr. Connor Young, chief Financial Officer. Before we continue, please note that today's discussion will contain forward looking statements made pursuant to the safe harbor provisions of the U.S. private Security Litigation Reform act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, the Company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the Company's public filings with SEC. The Company does not assume any obligation to update any forward looking statements except as required under applicable law. Also, please note that all numbers presented are in RMB and are for the third quarter of 2025 unless stated otherwise. With that, let me now turn it over to our CEO, Mr. Hua Zhi Hu. Please go ahead. Mr. Hu.

Hello everyone and thank you for joining our call today. In the third quarter of 2025, we continue to advance our business roadmap in a steady and disciplined MANNER. We delivered 42 units during this quarter, generating 92.5 million in total revenues. Under our annual strategy of Operations Driven Sales, we proactively optimized our delivery pace and prioritized resources toward supporting existing customers in building regular operations in order to establish sustainable commercial operating capabilities. As a result, delivery saw a temporary slowdown while new orders continued to grow strongly and our order backlog further increased. We believe this strategy will strengthen the foundation for commercial operations and drive EHang's healthier, more sustainable long term growth. This quarter we achieved sustainable progress in product portfolio, product development, industrial deployment and international expansion, laying a solid foundation for the next phase of growth. First, in terms of product portfolio, we continue to expand our product line this year to cover more diverse application scenarios in the low altitude economy. In October we officially launched the VT35, our next generation long range lift and cruise pilotless human carrying eVTOL. The VT35 has gone through a long six year period from finalization to productization, integrating the advantages of eVTOLs while avoiding shortcomings of products with other configurations. Adopting an advanced tandem wing design, the VT35 maintains full aerodynamic efficiency and flight stability while minimizing the overall size of the aircraft. Its design range with a full load is at least 200km. This is only our conservative data. Under the strict conditions, it can cover various medium to long distance scenarios such as cities, islands and mountain areas, greatly expanding the application scope of eVTOLs in intercity and regional transportation. Consistent with our safety first principle, the VT35 adopts fully redundant systems and autonomous obstacle avoidance, ensuring further enhancements in safety and reliability. Meanwhile, the VT35 extensively reuses the mature system architecture of the EH216s including its command and control system and ground infrastructure such as standardized vertiports and charging platforms. In the future, this will enable the true realization of intercity door to door travel while significantly reducing infrastructure costs and deployment thresholds. We announced the pre sale price of 6.5 million RMB for the standard version of VT35 in China. Supported by China's strong manufacturing capabilities and new quality productive forces. We believe this compelling pricing advantages will make the VT35 highly competitive in global markets. We have already received purchase orders from customers in Hefei, Zhejiang and Hainan and have started delivery and test flights in the third quarter on certification and industrial deployment. The Civil Aviation Administration of China formally accepted the VT35 type certificate application in March this year and the certification progress is progressing steadily. We are following the proven certification path of the EH216s and are fully accelerating the testing and certification efforts of the VT35. Meanwhile, we further deepen our strategic partnership with the Hefei government to establish the VT35 product hub in Hefei. The Hefei government will provide comprehensive support totaling 500 million RMB, including purchase orders to build an integrated layout across R and D manufacturing, airworthiness, certification, sales and operations. This partnership meaningfully strengthened our foundation across the entire industry chain. From the product portfolio perspective, the EH216S focuses on intra city transportation while the VT35 addresses intercity and regional transportation covering major metropolitan clusters such as the Yangtze River Delta, the Pearl River Delta and the Beijing Tianjin Hebei region, extending the radius of the one hour air travel circle to hundreds of kilometers. Together the two models form a intracity plus intercity product matrix that alleviates and expands ehan's low altitude mobility network. Separately, we also began mass production and commercial deployment of our self developed next generation formation drone, the GD 4.0 in the third quarter with a single charged flight endurance of up to 45 minutes and modular box launch design deployment. The lightweight system with high precision positioning enables long duration highly stable flights and significantly enhances visual effects and operational efficiency for aerial light shows. During the 15th National Games held in Guangzhou, we deployed more than 11,000 GT 4.0 drones for a night sky performance, making our largest formation record to date. We are also advancing development on several next generation models including the firefighting variant of the EH216 series, the VT series logistics aircraft and a two towter configuration to support a broader range of commercial applications. Our joint venture with Chang' An Automobile EHang Zhehang has been formally established and we will co design and develop the next generation product line, further strengthening industrial synergies and accelerating the diversification of our overall portfolio. In terms of industrial development, we continue to strengthen our manufacturing system and long term capacity planning. Our strategic cooperation with Nimth Group deepened further this quarter, leveraging this expertise in lightweight structural components and intelligent cabin system to enhance the core competitiveness of of Ehan's eVTOL products. Meanwhile, our joint venture with M-Power Yunfu Ehan has entered trial production for its phase two project at the Yunfu production base. Construction of our facilities in Hefei, Weihai and Beijing is also progressing as planned, forming a full value chain layout across R and D manufacturing, airworthiness, certification, delivery and operations. As these major industrial bases come online, we expect to further strengthen our production capacity, supply chain resilience and deliver efficiency. Internationally, we continue to advance global deployment in a steady and phased manner, establishing scalable market entry models through demonstration flights and local partnerships. During the quarter we achieved notable progress across Asia, the Middle east and Africa including ongoing trial operations under Thailand's regulatory Sandbox program and completing the Mideast's first intra city pilotless human carrier in Vito Flight in Qatar which showcased the efficiency of point to point low altitude transportation. We also carried out consistent demonstration flights and regulatory engagements in Africa and Japan. These overseas initiatives the Path of flight verification scenario application, commercial operation, laying a solid foundation for future large scale business expansion. On the policy front, China's 15th Five Year Plan proposal released in October explicitly called for accelerating the development of industrial clusters in strategic low altitude economy, providing long term, stable and high certainty policy expectations for the industry. Ongoing regulatory improvements, aerospace reform, infrastructure buildout and applications now are selectively create a comprehensive environment that supports the R and D production, testing and operations of evitos. As an industry pioneer, EHON will continue to participate in standards development and demonstration programs, leveraging policy momentum to accelerate technology deployment and industrial expansion. Guided by national policy support, local governments are increasingly supporting the low altitude economy, providing more practical operational guidance for the industry. For example, in October, Guangdong Province introduced several measures to promote the high quality development of the low altitude economy, supporting Guangzhou, Shenzhen and Zhuhai in pioneering intercity and intercity low altitude passenger routes and promoting cross border drone logistics in the greater Bay area. Similarly, in September, the Hong Kong government also proposed in its latest policy address to formulate a low altitude action Plan and launch an advanced sandbox pilot. The initiatives cover more complex scenarios including cross border flight routes and human carrying veto operations. We are currently working closely with the Hong Kong regulators to advance pilot initiatives. These policy breakthroughs will not only strengthen the industry's long term outlook, but also provide a clear institutional guidance for our commercial implementation. We also continue to invest in the broader industrial and research ecosystems. Following the establishment of the Jointed Research Institute with Tsinghua University this quarter, we recently signed a Strategic Cooperation Framework Agreement with the China Academy of Civil Aviation Science and Technology. The partnership will focus on six major areas including flight safety, road management, operational support, regulatory standards and technology validation, and jointly building a standard system for low altitude commercial operations. Looking ahead, we will continue to prioritize safety while leveraging our product strength, innovation capabilities and operational expertise as our core drivers, we will advance commercial operations in a disciplined manner and further deepen our global footprint. Benefited from an increasingly supportive policy environment, a more complete product portfolio and our continuously strengthened full chain capabilities across R and D manufacturing, airworthiness, certification and operations, we remain confident in our long term growth outlook. Meanwhile, we are also very pleased to welcome our new board member, Ms. Hai Yan Li to the company's Board of Directors. With her extensive global experience in capital markets, asset management and corporate strategy, her addition will provide significant support for enhancing the company's international perspective, capital market engagement and strategic decision making in the future. Her appointment will also strengthen the diversified structure and government capabilities of our board. We look forward to working with her to drive the company into its next phase of growth. I will now hand it over to our COO, Wang Zhao for operational updates this year. Thank you, Mr. Hu. In Q3 we continue to execute against our core strategy focused on safety, operational excellence and commercial deployment. Deployment we generated revenues of 92.5 million RMB and delivered 42 units of eVTOL, including 41 units of EH216 series and the first VT35 deliveries this quarter were mainly in China, totaling 39 units with overseas customers in Thailand and Malaysia. The quarter over quarter and year over year declines in revenues and deliveries were mainly due to the delayed payment schedules from certain customers. While some sales agreements were signed during the third quarter, payments were not completed in time, resulting in part of the originally planned Q3 deliveries being deferred and therefore not recognized as Q3 revenue. As of now, 30 units of those orders have been fully paid for and will be recognized in Q4. Based on our current delivery progress and order execution, we are maintaining our full year revenue Guidance of On Operational Readiness we are steadily preparing for the official commercial operations of the EH216s in China. Our two certified operators, EHang General Aviation and Hefeihui Aviation, continued human carrying trial operations throughout the third quarter. As of now in the second half of 2025, a total of 1,147 flight missions have been safely conducted by the two certified operators, including 359 human carrying flights, all demonstrating stable and reliable performance. Hefeihei Aviation's operations site is now ready for commercial operations and planned to gradually and carefully open to the public through a reservation system starting in December. This will allow more passengers to experience pilotless vehicle mobility firsthand. Meanwhile, preparation for Point A to B route trial flights at both sites are progressing well. Route planning, vertiport assessment and aerospace surveys have been completed and multiple rounds of test flights have already been conducted, leveraging capabilities of both certified operators. We will continue conducting additional human carrying flights and operational trials to advance the rollout of Point A to B route operations. Furthermore, we continue to support delivered customers with route flights. These flights have been carried out across a variety of terrains and environments including Meizhou island in Fujian, Hangzhou in Shaanxi, Chongqing, Inner Mongolia, and Qinghuangdao in Hebei. Through scenario specific verification and trial operations, we are gradually establishing an operational guidebook for different applications and accumulating high quality data and practical experience for future scale commercial operations. Flight tests in special environments such as plateaus, cold regions and straits are also progressing steadily further demonstrating the strong flight performance of the EH216s for external operational support, we have begun delivering or offering services of OC certification assistance and outsourced operations services through EHANG General Aviation and He Feihei General Aviation. Several customer projects are already underway to support future commercial scaling, we are accelerating the development of our key capabilities. In Q3 we completed the design of all required materials for the EH216s ground operator training program including training plans, flight menus, course outlines, training materials and assessment systems. The Central South Regional Administration of the CAAC has formally accepted our application and the first training program is expected to begin shortly. The training cycle will run through the end of the year and proceed under CAAC supervision. Our goal is to verify the first batch of ground operators early next year. We plan to build a team of about 100 professional ground operators to support scaled commercial operations and service delivery while also training additional ground operators for our customers own operating teams. Once a certain number of certified ground operators are available in the market, regular operations can be realized in various customer operation scenarios and the progress for other operating companies to obtain OC will be further advanced. At the same time, we are making steady progress on developing the E EHAN trip ticketing system. The internal testing version is now live, allowing our employees to book and experience flights through the online platform and initial feedback has been very positive. This will prepare us for upcoming launch of the public online ticket service. Internationally, our global visibility and flight footprint continue to expand. To date, the EH216 series had accumulatively completed completed over 80,000 flights globally, further strengthening its international presence and credibility. In Japan, the EH216s successfully flew near the Osaka Kansai Expo venue and at the foot of Mountain Fuji while the EH216L completed first cargo logistics route flight in Ishikawa Prefecture in Rwanda, in collaboration with the China Road and Bridge Corporation, we completed the first first human carrying flight of the EH16s in Africa, extending our flight footprints to 21 countries regarding overseas regulatory certification, we are working with local partners and civil aviation authorities in multiple countries including Saudi Arabia, the uae, Thailand, Brazil and South Africa to advance the establishment of bilateral airworthiness validation with the CAAC and to support the validation of type certification application for the EH216s. Relevant regulatory frameworks in these markets are accelerating and maturing, laying important groundwork for future commercial EVTO operations. Meanwhile, we are also actively exploring trial first pathways to initiate operational trials overseas. In October, together with Civil Aviation Authority of Thailand and local partners, we officially launched the Thailand Advanced Aerospace Mobility Sandbox project through flight validation. Under the sandbox framework, we were able to obtain special operational approval through an expedited regulatory process. This initiative represents the world's first regulatory sandbox model for advancing commercial LVDO operations and is expected to become a benchmark program globally. The EH216s has now undergone over a month of continuous trial operations within the Bangkok sandbox area, showing strong stability and reliability across all trial flights. We also conducted series of on site emergency response demonstrations for CAAT covering scenarios such as propeller failure, communication loss and other contingency situations to validate the autonomous handling capabilities and safety performance of our pilotless intelligence system. These efforts not only validate the commercial operational model for each vetoes but also establish a solid foundation for replicable regulatory and operational framework. Looking ahead, we plan to expand the sandbox to Pattaya Kohlon Phae and Koh Sami, forming a demonstration network covering tourism, commuting and inter island transport. This will also provide a scalable and replicable pathway for commercial pilot projects across other Southeast Asian markets in the Middle East. With operational authorization from the Qatar Civil Aviation Authority and the support from the Ministry of Transport, we successfully completed a series of human carrying flights with EH216s in downtown Doha and the region's first pilotless intracity point 2.0 veto flights. The flights connected to the Doha port and the Katara Cultural village, reducing a 30 minute car ride to just eight minutes, clearly demonstrating the EH216 as its application potential in urban air mobility scenarios. We will continue deepening cooperation with Qatar's Ministry of Transport and advance the pilotless air taxi project in a phased manner in Central Asia. We signed an MOU in September with the Group, a major industrial and commercial enterprise in Kazakhstan, outlining a phased procurement plan for 50 units of EH 216 series EVTO. Together we will establish the first UAM operations center in Central Asia and plan to build a localized assembly base further promoting the localized development of the low altitude economy industrial chain across the region. The partnership has attracted strong drawn attention from Kazakhstan's First Deputy Prime Minister and the Governor of Karaganda region. We held two meetings with the First Deputy Prime Minister in Beijing and Astana during which Yiyeon was invited to share China's leading operational experience and regulatory best practices to support Kazakhstan in building a compliant and sustainable low altitude economy. Beyond our human caring business and in line with this year's strategic priorities, we are also actively expanding our non passenger business including emergency firefighting, logistics, urban inspection and drone light shows for emergency response applications. We have developed an integrated system. It links small drones deployed from automated drone ports with our command and control system and specialized firefighting UAVs. This solution enables cities to build a comprehensive rapid response emergency framework. Several municipalities, including Fengshan District in Beijing have already expressed strong interest and project planning and demonstration drills are underway. Ehan was among the first enterprises to conduct drone light shows this year. Our newly developed GD 4.0 drone also demonstrated strong performance and high scalability. It successfully completed an 8,000 drone performance for CCTV's China Science and Technology Innovation Gala and over 11,000 drones for the National Games and has already achieved formations of up to 14,000 drones. Currently, test flights for a 20,000 drone show are in progress which would surpass the current Guinness World Record. In addition, the GD 4.0 is multifunctional with minor modifications. It can be used for urban inspection and as a key component in building 3D digital twin models and smart city management systems. The strong overall performance of the GD 4.0 positions our aerial media business to shift its focus from primarily providing show performance series to becoming hardware solution suppliers through direct sales of formation drones. To date, the GE 4.0 has secured firm orders for 3,000 units and customer purchase intentions exceeding 10,000 units. Selling formation drones not only enables us to quickly recover R and D investments and generate product level margins, but also helps us cultivate the drone formation show market and capture greater market share. In addition, it brings recurring revenue opportunities from aircraft maintenance and consumables. This drives a more diversified and resilient revenue structure for the business looking ahead, we'll continue to strengthen our overall competitiveness through our diversified product portfolio, modified CIS low altitude solutions and solid safety record, improving commercial operation capabilities and our growing global partnership network. These capabilities collectively reinforce the foundation for the company's long term impact and sustainable growth. Now I'll turn it over to our Chief Financial Officer Connor to walk us through the financial results. Hello everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site. Now I'll present some key financial data. Total revenues were 92.5 million RMB in Q3 2025. These year over year and sequential decreases are primarily driven by decreased sales volume of EH216 series products. This was primarily due to the company's strategic focus being adjusted to the various operational preparations before the launch of operations as well as assisting customers in in the establishment of operation certificate systems and capabilities which thus affected the short term delivery. Gross profit was 56.2 million RMB in Q3 showing both year over year and sequential decline caused by decreased revenues in the quarter. The gross margin in Q3 was 60.8% slightly slightly lower than 61.2% in Q3 2024 and 62.6% in Q2 2025. Despite a slight decline, our gross profit margin remains at a relatively high level which reflects our competitive advantages in the evito sector. Turning to expenses, total operating expenses in Q3 were 151 million RMB which remained basically flat year over year and decreased quarter on quarter. The quarter on quarter decrease was primarily due to significant decreases in sales and marketing expenses. The adjusted operating expenses for the third quarter which excluded share based compensation expenses were 89.1 million RMB, representing a slight slight year on year increase of 2.6% and a quarter on quarter decrease of 8%. This quarter on quarter decrease was mainly due to the Company's continuous efforts to enhance operational efficiency which has led to a reduction in various operating expenses. Adjusted net loss was 20.3 million RMB compared with adjusted net income of 15.6 in the second quarter of 2024 and 9.4 million RMB in the second quarter of 2025. The adjusted net loss was mainly caused by decreased revenue generated in the quarter. In Q3, the company raised US$10 million through its at the Market Offering program. The proceeds will mainly be used for the Company's research and development of next generation technology, technologies and products, team and production expansion, establishment of new headquarters, commercial operations, working capital and general corporate purposes. The Company continues to have strong capital reserves. As of September 30, 2025, our cash and cash equivalents, restricted short term deposits and short term investment totaled 1.13 billion RMB. This solid foundation gives us the flexibility to support future R and D investments, expand our production capacities and grow our commercial operations. With steady delivery progress for orders in hand in the fourth quarter, we currently remain confident in achieving our full year 2025 revenue guidance of approximately 500 million RMB. Looking ahead as commercial operations begin to scale and international sandbox projects advance with the establishment of a scalable operating system and the continued expansion of our global footprint, EHAN is rapidly building a robust foundation for sustained long term growth. We will continue to pursue healthy, sustainable.

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. If you're on a speakerphone, please pick up the handset to ask your Question, your first question comes from Tim Hsiao with Morgan Stanley. Please go ahead.

Hi, I am Joey from Morgan Stanley. I would like the management to share more color on the Sandbox initiative. Could you share more from the capital markets perspective in terms of the exact or rough timeline that we are currently looking at particularly on specific crucial stages like OC application transition from trial operations to official commercial operations And I've heard that you are currently expanding this sandbox initiative to four regions and so collectively. What kind of scale are we looking. At from this perspective? An additional separate question is that you are planning to replicate the Sandbox initiative to other Southeast Asian countries. I was wondering, could management share any progress on that front? Are there any engagements that we are having with various countries in that region? Because we know that eVTOL is a good fit for many of these island countries. So could management share more color on that? Thank you. The Founder aerial sea ventures. If I tie now dance.

Woman can fit on the high and training. Thank you for your question. So let me answer this question. Actually in mid October the regulators from Thailand, the civil aviation regulators from the Thailand from Thailand has actually approved that we conducted a um, Sandbox initiative in Bangkok. This is a from point A to point B sandbox initiative. So the goal for us is to officially commence EVITO commercial operations in the next three months. So currently we're still conducting daily tests and we are submitting these test data to the civil aviation regulator in Thailand. Actually just from Monday, the Director General of Thailand's Civil Aviation authority just took a ride of our EVITO flying across the city center of Bangkok. This marks the very first of its kind for a Director General of a civil aviation regulator to ride on Evito. And actually there is an important industry conference called IATA that's going to be held in Q4 in 2026. So given this important meeting, the goal for the Director General of the Thailand civil aviation regulator is to officially launch commercial operation of eVTOLs. Before the conference took place, actually we just released an interview which is posted on YouTube and X other social media platforms. It's available out there. So it's an interview between the founder of our Thailand operator between the founder of Aerial company which is our Thailand operator. So in the interview they officially, you know, mentioned they proposed that they are going to have 20 sandbox initiatives in 20 by the end of 2026. So you know by then it's going to be commercial operations where it's going to generate revenue. So so judging by this goal, we are looking at delivery of 100 EH216 units in 2026. And looking at the overall market given the islands and also the transportation requirements and needs out there, we are looking at a potential over thousand units of EH216 to be delivered to this market. But of course we understand that there has been some misunderstanding from some industry analysts recently on our commercialization path. However, I want to assure you that with the preparations we have put in place over the years, we are preparing and we are going to see a breakthrough in EHang's commercial operations both domestic and overseas. And with the engagement with other regulators in the Southeast Asian countries, I'm going to tell you that they are progressing well. We are maintaining close communication with them. We are currently engaging the authorities in Cambodia, Malaysia and Singapore just to give you an information. So the Director General of the Singapore's civil aviation also visited and saw the 216s demo flight. I personally offered the explanation. So it's a new industry and it's with new say demo projects that we are going to enter into our commercial operation in Thailand. It's going to set up a good role model for the rest of the countries, surrounding countries in Southeast Asia. So hopefully that answers your question. Thank you very much.

Thank you.

Your next question comes from James Zhu from ubs. Please go ahead.

Hi Management. Thank you for taking my question. I was wondering why we're expanding into unmanned product portfolios. For instance firefighting drones or eVTOLs as well as the formation performance drones. What's their contribution to our revenue and also profit? So could management share more on that?

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This is Wang Jiao. Let me take your question. Actually the low altitude economy encompasses or consists of both manned business and unmanned business. They are both critical components of this economy. With ehan's decade R R&D investments, we first set out pick manned operations as our goal. Because this is the most challenging sector because it involves flying man from the ground up to the sky. So poses significant challenges. And over the years we have accumulated. A lot of technologies patents. So with our capabilities covering various travel distance, various size of the evitos, we are able to tackle all of these problems. Nanga. Actually for our 216 it's actually a series of products. We have the 216s which is for manned transportation and we have 216l which is dedicated for logistics, 216f dedicated for firefighting and 216lf dedicated for forest fire extinguishing, And additionally we just launched a VT35 in October. It also has a model dedicated for logistics services and with other application scenarios available. So what we are trying to do is to maximize the technology that we have. We are going to introduce more models, we're going to expand our product portfolio so as to increase the revenue and try to. You know, that's our strategy and how we're going about it. In the low altitude economy, maybe in the past, analysts are not following our unmanned products very closely. So in order to achieve sustainable healthy development, we need to extend our product portfolio so as to gain more market share. The reason why is everyone is focused on demand evitos. That's because it's the most challenging part and that's the one that we're choosing to focus on first. So hopefully that's the first bit.

UNKNOWN and

Doy. You know, as our manned Evito hub is gradually entering commercial operation, we have been expanding the teams, recruit more personnel and try to extend our unmanned business. What we're trying to do is to build a comprehensive product portfolio which can generate positive cash flow for the company. As we mentioned at the end of last year and as well, earlier this year, we're trying to is to adjust the product mix and trying to have a more diversified portfolio. So nevertheless they all fall under the low altitude economy umbrella. So they're all going to be the major business for our company. So going forward you're going to see a much more diversified product mix which all going to contribute to the company's bottom line.

Thank you.

Thank you. Your next question comes from Chen Yu from Guangfa Securities. Please go ahead.

Hi management. Thank you for taking my question. I got two questions. One is on our VT35 following the October announcement, we noticed that There is a one unit delivery of the VT35 in Q3. I was wondering what the plan is for the airworthiness application as well as type certificate application. And the second question, Perhaps I joined the call a little bit late. I'm not sure whether you have touched on that or not. We noticed that the gross Profit margin for Q3 declined slightly. Whether the gross profit margin will stabilize at around 60% and what's the cause of the decline for Q3 in gross profit margin?

Thank you.

This is Wang Xiao. I'll take your first question. Actually you're right. We debuted the VT35 model on October 13th. Actually we submitted to the TC application as early as March this year. And the airworthiness application or review Progress is progressing steadily. Maybe you have noticed that we released the VT35 route flight demo at the October press conference. It actually has successfully completed multiple key tests including the wind tunnel tests, ground load tests, multi rotor test flights and many other tests. And additionally, you know, the design of VT35 incorporates both the multi propeller as well as a fixed wing. You know, we have accumulated rich experience. In our EH216s airworthiness review process and we're going to leverage those learnings and you know, together with the R and D team as well as the airworthiness application team that we have, it's going. To accelerate the AC process. We're pretty confident in that.

This is Connor on the gross profit and margin. Yes, you're right, it declined slightly. So the causes behind that for one, there is repeat purchases from some of our existing major customers. That's a good thing. And also we have made sales to some of the distributors where we offered some discounts. So these two are the causes of the decline in the gross profit margin. And with regard to the VT35, we delivered one unit this quarter. However, you should know that this model. Is still in the trial production phase. And not being mass produced. That's why the unit cost of this model is relatively high. But we still have a lot of. We have received a secure. We have secured orders for VD35. Hopefully that's going to bring down the unit cost of the VD35. And over the long term we are. Going to expect our gross margin to remain stable at around 60%. But you're going to see the gross profit margin fluctuate slightly as we introduce more products to enrich our product mix. For instance, the unmanned business such as the drone formation performance, firefighting and the logistic aircraft and etc. As that increases. So it's going to fluctuate the gross. Profit margin, but over the long run, 60% of gross profit margin. Thank you.

Thank you.

Your next question comes from jason sum with BDS Bank. Please go ahead. Pardon me. Your line may be muted. Pardon me. Jason, you may ask your question. Your line may be muted. Pardon me. Once again, you may press Star one to join the question queue. We'll now pause a moment to allow for any final questions. Pardon me. That is all the time we have for questions this evening. Thank you for participating. You may now disconnect.