ECARX sees Q1 revenue jump

ECARX sees revenue jump in the company’s Q1 earnings report. ECARX CFO Ramesh Narasimhan joins Yahoo Finance Live to discuss the company's earnings report, how the EV revolution in the auto industry is impacting the company, and what ECARX’s partnership with Epic Games means for the future of auto dashboard displays.

Video Transcript

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Mobility tech company, ECARX is vying for its place in the growing automotive computing market. The business went public via SPAC last year with a valuation of $3.8 billion. It's backed by Chinese auto giant Geely and produces in-car productivity and infotainment products. Its technology can be found in around 5 million vehicles globally. Today, it reaffirmed full-year guidance, citing strong demand.

Joining us now is Ramesh Narasimhan, ECARX's CFO. Thank you for joining me in this morning. So walk us through some of this earnings report. I mean GAAP EPS beat by about $0.06 revenue missed by $0.48 million. What are your big takeaways from this earnings season?

RAMESH NARASIMHAN: Yeah. Good morning, Rachelle. And thank you for having me here. It's been a very, very strong performance in Q1, revenue grew year-over-year at 16% in an environment where the production, specifically in China year-over-year has been down 10%. Our profitability is very strong. Our gross margin grew 52%. Adjusted EBITDA was very, very strong. So we're pretty excited about the prospects and what we are seeing.

There is a very strong demand as we are helping with the industry to transition to more electric vehicle future. And certainly, we are pretty excited about the growth opportunities that we're seeing. And yes, we reiterated our profit and our revenue guidance for this year that we will get to $700 to $720 million, which represents about a 38% growth versus last year. So a very exciting milestones for us to achieve.

RACHELLE AKUFFO: And what's driving those projections because a lot of people are wondering, should I be tightening my purse strings in a tough economic environment? What is giving you some optimism that in terms of this full-year guidance?

RAMESH NARASIMHAN: Well I think the shift towards electric vehicle is happening quite rapidly. We're certainly leading in the leading market. From an electric vehicle perspective, we're seeing very, very strong demand for our products. Certainly the importance of customer experience inside the vehicle is gaining a lot of importance, for which you need strong technology providers.

And we are a pure play automotive. And that's a key differentiation with a lot of other players, where pure play automotive, we are vertically integrated. What that means is we have end-to-end solution at a very, very cost competitive pricing. But also simpler and quicker to implement. So all of that gives us a lot of confidence with the growth that we have forecasted.

RACHELLE AKUFFO: And some people might not be familiar with the company, but they're familiar with a lot of the brands who use your products and services, including Mercedes-Benz, Volvo, Lotus Smart, and Polestar. Talk about the play there because it's hardware and software as well. And what do you really bring to it to the car experience? Because I think of you guys are sort of the internet of things of cars.

RAMESH NARASIMHAN: Yeah. Well, I mean, very simply, we are a mobility tech provider. But it's a lot more than that. As I said, we are vertically integrated, we do software-on-chip, we do the operating systems, we do the software stack on top of it.

So anything that enhances the digital customer experience inside the vehicle, we enable it. So what is really critical is the speed, the performance of the tech behind the scene. And that's what we are involved in.

RACHELLE AKUFFO: And I want to ask you about the future of dashboard tech. I know a lot of us are already a little bit distracted, but we are seeing a lot more development there. And you have a collaboration with Epic Games' Unreal Engine. Talk about what you're hoping to bring to the dashboard experience.

RAMESH NARASIMHAN: Yeah. I mean, certainly, as I said, the digital customer experience inside the vehicle is getting enhanced quite a lot. Earlier this year, we partnered with AMD and in Unreal Engine to showcase 3D graphics and gaming capability inside a vehicle. Of course, very important to note that the driver cannot use it while they're driving.

But the requirements from a customer perspective is certainly increasing. And what this does, you know, our partnership has enabled us to do is to have a real gaming experience like you would have at home inside the vehicle. So it is starting to get seamless integration into your vehicle and mobility.

RACHELLE AKUFFO: And a lot of people are looking at what's next in terms of autonomous driving. I know Elon Musk told CNBC, he said, we may see fully autonomous vehicles by the end of this year. Do you have a sort of timeline for that?

RAMESH NARASIMHAN: Yeah. I think autonomous vehicle is something beyond the scope that we are working on. We are a key enabler in terms of the digital customer experience. But it is important to see that the industry is certainly focused on enhancing user experience, whether it is be autonomous driving or whether it is the gaming I just mentioned. So I think there is a lot of engineering focus on enhancing the driving and the customer experience. So I think it will continue to evolve.

RACHELLE AKUFFO: And I know you mentioned AMG. I did want to ask you about any concerns that you have about the chip race here. And especially when there's this sort of clamoring because of AI and everything else for certain kinds of chips. Are you seeing that affecting the way you're able to do your work or perhaps the development for products and services that you have?

RAMESH NARASIMHAN: Well, we have a number of partnerships that we work with. We have got our own SOC where we have developed a 7 nanometer chip with one of our JVs called SiEngine. We partner with AMD. We use other products as well. So we are very, very comfortable to have a partnership ecosystem.

Our main objective is to deliver the best product what the customer is looking for and to enable that digital customer experience. So we don't see an issue in terms of these partnerships that we have. It actually enhances the capability and the products that we can offer.

RACHELLE AKUFFO: I do appreciate you joining me this morning. Ramesh Narasimhan, ECARS's CFO, thank you for your time today.

RAMESH NARASIMHAN: Thank you.