ECARX Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 11 speakers on the call.

Operator

Good day, and thank you for standing by, and welcome to IcharEx Q2 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. On your telephone. I would now like to turn the conference over to Adam Kaye, Investor Relations, E.

Operator

C. Rex. Please go ahead.

Speaker 1

Thank you, operator. Good morning, and welcome

Operator

to our

Speaker 1

Q2 2023 earnings conference call. With me today are Ecorp's Chairman, Chief Executive Officer and Co Founder, Zhiyue Shen Chief Operating Officer, Peter Serino And our recently appointed Chief Financial Officer, Phil Xu. This call is being recorded. Before we begin the prepared remarks, which will be followed by Q and A. Today's presentation will refer to both GAAP and non GAAP measures and also contain forward looking statements, which are based on the environment as we currently see it and as such includes risks and uncertainties.

Speaker 1

Please refer to our filings with the SEC for more information on the

Speaker 2

Thank you, Adam. Hello, everyone, and welcome. Thank you for joining our Q2 earnings call. Our momentum built in the 2nd quarter with strong revenue and quarter on quarter gross margin growth demonstrating the growing interest in our product and the demand from consumers for a safe and more enjoyable in car service. There are now 5,200,000 vehicles on the road that incorporate our technology across 21 brands offered by our 12 automotive OEM customers.

Speaker 2

Vehicles on the road equipped with our products increased 6% From last quarter and 30% from the same period last year, our dedicated team of around 2,000 people, including over 1580 years, has firmly established DecarX as the leading tech provider in China, and we are gaining increasing attention from important automotive OEMs outside of China as well. We operate in a rapidly growing and evolving marketplace. The rollout of digital copies also increased our Content per vehicle and ASP. The appeal of a company like e CarX is that we are working in the sweet spot Of Automotive, acknowledge our marketplace is currently being reinvented and aware of the experience As the know how of the Chinese market, we have some of the most demanding customers in the world play a vital role. With more than 30 vehicles in our launch pipeline over the next 18 months, We expect those costs combined to ramp into an additional 1,000,000 vehicles on the road with e car S technology.

Speaker 2

In quarter 3 alone, we expect to see production of a new GD model using the Antora 1000 system on chip As well as the Linkedin Code 8, which showcases our 4 consoles with the Antoine 1.7 Pro CloudPick, 5G Auto operating system and our automated driving control unit, ADCU, with LG plus ADAS from T CAR. Peter Threno, our COO, will now discuss these important milestones and some of our operating accomplishments in quarter 2. Peter?

Speaker 3

Thank you, Ziyu, and good day, everyone. Ziyu detailed our strategy and customer successes. So I'll cover what we did operationally in Q2. Our focus is twofold, investing into R and D, which translates into better, more innovative products and expanding our network of partners. Our company now operates in 14 locations across 3 continents, with recent facilities opened in the U.

Speaker 3

S. And Germany. The consolidation of Gika brought a further 300 engineers into our company based mainly in Suzhou and Hangzhou, China. Our new R and D Engineering Center In San Diego, complements our software development center in Sweden and will be led by E Carex's CTO, Yung Chi Yang. The team there will focus on advanced automotive IP development, and we will plan to scale up the facility over the next 12 to 36 months.

Speaker 3

Similarly, our engineering and sales facility in Stuttgart, Germany was announced this quarter. It aims to support European OEMs with a focus on customers in Sweden, Germany, France and the UK. These teams complement our core China based engineering R and D team. And all in all, we have more than 1500 engineers supporting our global R and D efforts. This commitment to R and D enables us to lead the sector in the new product introductions that push the boundaries of the in car experience.

Speaker 3

At our Tech Day on March 24 in Moomon and at our Investor Day on May 9 in New York, We announced several new products that support our growth now and in the quarters ahead. These new hardware and software solutions Including the Antora series, which provides a high end automotive grade intelligent cockpit experience with competitive cost performance. E CarX's well integrated Antora SoC solution also helps customers reduce their engineering costs and speed up their time to market. Very soon, we will be seeing more and more cars on the road with this technology. Makalu is one of the most powerful intelligent cockpit products available today and it offers a new in vehicle experience with amazing 3 d graphics, Combining both security features as well as entertainment elements powered by an AMD SoC And Unreal Engine Graphics Solutions.

Speaker 3

Cloud Peak, recently debuted in the Volvo EX30, serves as a cross domain infotainment system software. It is also worth noting that Continue to successfully sell our existing products, announcing in May that together with Noyesoft Corporation, we will customize the mass production of an intelligent cockpit product for the Chang'an Mazda CX-fifty model. These are based on our E02 SoC core module, which already has been deployed across almost 1,000,000 vehicles across 26 separate models of a variety of automotive OEMs. This product offers many useful and sophisticated functions for the modern driver. As you know, eCARx is at the center of a unique Differentiated partnership ecosystem designed to create disruptive innovation and technology for growth for the automotive sector.

Speaker 3

We were again active in the Q2 in expanding these partnerships, which enable us to more quickly add product features, Enter new functional domains and attract new customers. We have established a close partnership with Shinji Meizu, a leading Chinese smartphone manufacturer and most recently we announced Flymi Auto, an exclusive new operating system that seamlessly integrates Meiju's smartphones into vehicles. During the Q2, we also signed an important agreement with Epic Games, A pioneer in 3 d immersive tools. We will deploy their 3 d graphics capabilities for our Makalu digital cockpit And we'll further collaborate on next generation digital Coptrics and infotainment applications. Finally, at the end of June, We increased our investment in our long term partner Gika Intelligent Robotics to 70%, consolidating Gika's results into Ekar X.

Speaker 3

Gika is already focused on autonomous solutions for the Geely Group and will continue to do so. While EcorX will integrate GECO Systems into our products, helping us build an ADAS solution and a customer base outside of the Geely Group, both in China and globally. Zika further increases the breadth of Ikaris' technology stack, bringing ADAS capability into our core product line. This combination increases the future content per vehicle We can provide into tech minded vehicle OEMs. I'd like to spend a few minutes discussing the Lincoln Code 8, which will be on the road later this year.

Speaker 3

This vehicle contains our entire full product stack as we bring the software defined vehicle to the road. The digital cockpit is powered by the Antoro 1000 Pro platform, deeply integrated with Cloud Peak Software And with FlyMe Auto for connectivity and cloud services. It is e CarX's first launch with the level 2 plus ADAS solution from Gika, a technology that we've now brought in in house given our recent investment. The total solution offers the consumer Unique, customizable desktop experience with powerful, intuitive, easy to use functions that seamlessly connect the car to make travel more comfortable, more secure and more supportive. And of course, with full intelligent based Learning and voice control, this is a fantastic vehicle.

Speaker 3

I would advise a test drive when you can. Finally, I want to introduce our recently appointed CFO, Phil Zhou, who has been with EcorX since early 2021 And was the CFO of China and Head of our China operations. His predecessor Ramesh Narasimhan will now go on to support EZU as an advisor on key financial matters. I'll now turn the presentation over to Phil to review the financial results.

Speaker 4

Thank you, Peter, and good morning, everyone. As you will have already seen in the morning, eCallX enjoyed a very strong second quarter with revenue of RMB952 1,000,000, Up 45% compared to the prior year period, driven by sales of Goose revenue at 87% And the high margin software licensing revenue at 2 12%. Service revenue were up 144% from the 1st quarter Was down 36% year on year, offsetting some of the growth in goods and software. It was mostly as a result of timing differences in non recurring engineering revenue, which is expected to be booked in the second half of the year. Gross margin increased to 31.3% With increases in all major products and solutions between Q1 and Q2, the gross margin rates on computing platform products And hardware solutions improved from 20.7% to 21.1%.

Speaker 4

All software and licenses from 70.5% to 93.8% and on services from 21.6% to 29.7%. All leads will realize through number 1, a dedicated focus on products and solutions portfolio setting number 2, persistent cost optimization and number 3, new product development and the launch at the higher average selling prices. We also drove the effective operating expense control with OpEx decreasing by 26% year on year. The optimization was primarily driven by number 1, the carport autonomous driving inception developments and the high definition mapping in 2022 and optimize our China headcount. Number 2, we drove lean operations and the OpEx control in 2023.

Speaker 4

At the same time, we redeployed the savings and invested into global expansion Into the UK, Sweden, the United States and Germany to make sure that we have a good footprint in international markets to work with top global OEMs. As Peter already emphasized, we continue to invest in R and D, Up 2% quarter on quarter, but the remaining lower than the same period last year as we lap to the succession of our ADAS perception software development last year. Following our acquisition of an additional stake in Cheekah, some of that investment will now come back. Adjusted EBITDA was negative RMB158 1,000,000, up RMB30 1,000,000 from the same period of last year. As a result of a significant improvement in net loss due to a much higher level of share based compensation expense last year.

Speaker 4

Turning to the balance sheet. At the end of the Q2, the cash and the cash equivalents balance was RMB925 1,000,000, And improvement of RMB24 1,000,000 against the end of 2022, reflecting our good execution on profit improvement and the consulting expenses. However, it is RMB90 1,000,000 outflow versus the end of the Q1. We are growing very rapidly and we will need capital to drive that growth. While we are on the right path to narrow down our profit loss, focusing on operational excellence in the supply chain inventory Any collection and payment management, as well as raising new funds, we aim to further improve the cash status.

Speaker 4

I would like to remind you of the historical seasonality of the business, which mirrors the common pattern in the industry. We would anticipate the 2023 keeping a similar pattern through the end of the year, given the pipeline of planned launches scheduled for the 3rd Q4. With that, I will turn the call back to Zhu for some concluding remarks. Then we will start the Q and A session.

Speaker 2

As we grow, it is important to remember why we are here and what is our purpose. The rights of the software defined vehicle is why LGV Li found e car X as vehicles evolve into sophisticated digital devices With greater vehicle autonomy and as drivers' expectations of their in car is currently increased, The demand for high powered, seamlessly connected automotive focused computer platforms expands significantly. Ikar X is a global mobility tech provider working with automotive OEMs to create new vehicle platforms from the ground up. We are well positioned to capture here its share in a large and rapidly evolving market, supported by Our differentiated force technology that simplified and expanded automotive OEM product development of timelines, Our strong results this quarter demonstrate the strength of our competitive position and the attractiveness of the market we are pursuing. Operator, could we please start the question and answer session now?

Speaker 2

Thank you.

Operator

Ladies and gentlemen, we now begin the question and answer session. And the first question from Xiaoke Zhang from CIC. Please go ahead. Your line is open.

Speaker 5

Thank you. Thank you, the

Speaker 6

team, for taking my questions. Congratulations on the results for Q2. I have four questions for the management team. The first two questions is about the search and development strategy. So the first question It's regarding the collaboration with Cyngine.

Speaker 6

So could you provide a brief update regarding how the Collaboration, what is the progression of the development of the next generation SoC? Thank you.

Speaker 3

Cyngine produced their SoC, taped out their most recent SoC at the end of last year, And we've been working very closely with them to bring that product to launch in our Antora 1000 and our Antora 1000 digital cockpit platforms. So we have both of those platforms launching on vehicles as we go through mid-twenty 23 and in the Q4. So I mentioned in my presentation Around the link go 8, this platform has our Antora 1000 Pro system on it, which includes the Saiongen SC1000 SoC. And we're quite excited about the digital cockpit that we're able to launch on that vehicle, Which has got a full breadth of our technology stack on it, the digital cockpit, we are launching the FlyMe Auto Link And finally, auto software, our Cloud Peak software as well as our autonomous driving system. So that's a great vehicle that demonstrates And the full technology stack of

Speaker 6

eCAR X. Right. Thank you for the answer. So for my second question is regarding the intelligent driving. And we have seen from the presentation that e car access gaining a control stake in Jikai, so could you provide us more insights into how Jikai is going to lay out the roadmap of the intelligent driving Products?

Speaker 6

Thanks so much.

Speaker 3

Sure. I mean, we started we invested in Geely some years ago In a close cooperation with Geely to launch the autonomous driving control unit. As mentioned, that will come out On the Lincoln Coast 8, we're quite excited about the level 2 capabilities that, that will bring to the market, Including navigation on autopilot solution that will eventually be brought to that vehicle. I would expect that we would be announcing further steps in the future to build out Our ADAS solution set, we're continuing to make investments, both in the Level 2 system that I mentioned, As well as into further advanced technologies in that space.

Speaker 6

Right. Just a quick follow-up. So We can see a lot of BEV plus transformer like the perception Technology in the market. So is there any plan for GCAR to follow that plus the BEV plus transformer?

Speaker 3

Yes, there's no question we'll continue to advance our technology in the autonomous space. We're pretty excited about the level 2 capabilities, The Level 2 plus capabilities that get launched, with this vehicle, there are additional vehicles, that this system will be launched on. E Car X is also Aggressively pursuing additional programs in the market. So, I would expect that we'll continue to make announcements in the future, And I also would expect that we'll continue to build out our technology stack in the ADAS space as we go forward.

Speaker 6

So for the next two questions regarding the performance of IKAIX in the Q2. So we have seen that there is a Relatively large increase in the revenue for the Q2. So could you help us do a more detailed breakdown into What projects in the project level, like what projects actually contribute to this increasing revenue? Thank you.

Speaker 4

Thank you, Jesse. This is Bill. I'm happy to take your question. So first of all, we achieved the Q2 revenue With a strong year over year growth, 45% and the treatment by our strong growth in our core computing platform and the software products. So regarding the computing platform products and hardware solution, we achieved the CNY 670,000,000, 87 percent EBIT growth.

Speaker 4

Majority of that achievement was attributed by further penetration into Geely Auto And the GV Ecosystem Brands in the year like smart, loaders and vehicle. And we also focus on our product and solution In the new EV market segment and we captured the curve of the market growth. So if you look at the general market growth in the first half of twenty twenty three, The new EV sales in China actually is 44% growth year over year. And in the quarter, we also drove The software and the license revenue, we achieved a record high like CNY113 1,000,000, 212 percent growth. The growth was primarily driven by the IP license sales.

Speaker 4

And at the same time, we also Drove very effective cost reduction on 3rd party software sales. So, in short, We optimized the portfolio of the product and the solution sales, increased ASP or total revenue per unit and the persistent cost optimization 3 major reasons are the engines for our profitable growth.

Speaker 6

Thanks so much for answering. So the last question Regarding the projects, we have just heard that there's going to be 30 models in the next one and a half year, right, Phase 0. Could you help us do a more clarification of this?

Speaker 3

Yes, certainly. I mean, we've got a very robust pipeline Inside of our business, so we've got, as we mentioned, the engineering team of close to 1500 engineers that are all working on various set of programs. These products, I think, span numerous OEMs. We mentioned China and Mazda. We've recently announced FAW As well as the LincolnCo product we mentioned today are all in our pipeline.

Speaker 3

In addition to that, we've got international launches across brands like Smart, Lotus, Volvo and Polestar. So we're quite excited about the breadth of products that are in our launch pipeline And continuing to work with additional OEMs beyond that set to broaden the set of customers that we work with.

Speaker 6

Right. Thank you, Tim, for the elaboration. I appreciate it. Thanks.

Speaker 3

Yes. Thanks for the questions.

Speaker 4

Thanks.

Operator

Thank you for your question. We are now taking the next question. The next question from Derik Soderberg from Cantor Fitzgerald. Please go ahead. Your line is open.

Speaker 7

Yes. Hey, everyone. Thanks for taking my questions. I wanted to start with gross margin. Gross margins have been on the rise.

Speaker 7

Curious if you can maintain gross margin sort of above 30% or at these levels. And then Phil, can you talk about sort of how you're approaching The pricing of the hardware and software, is there a target gross margin that you're hoping to get? And how should we be modeling Gross margin going forward?

Speaker 4

Yes, of course. I'm happy to take the question. So, we deliver e cars deliver a diversified Product and solution offline. And we on purpose shift our focus on how better added product and solution to our customers And we are able to integrate the value of the industry chain and offer a benefit to our customers and the partners. So what happened recently is we focused on transforming our software and the license selling.

Speaker 4

Basically, we want to transform our business model into a license or royalty per unit business model, which actually can improve our profitability a lot. At the same time, as Peter just mentioned, we are going to launch More than 30 vehicle programs in the market, which means we have enough pipeline at our hands. So we are able to continue to drive our service, R and D service growth in the longer term. And of course, we focus on our call computing product selling. So we launched a new product and we got evolving our product hardware solution product, right.

Speaker 4

So we offer Encore, we offer Mikado. We offer those advanced technologies and keep improving The content per vehicle. So with that, we are able to drive our consistency and pricing as well as a profitable growth. So these are the drivers that the company is taking.

Speaker 7

Got it. That's helpful. And I also wanted to ask just touch on that strong pipeline, just as my follow-up question. I'm curious what sort of the revenue mix between electric vehicles and combustion engine vehicles today. You guys mentioned sort of 30 vehicles Or so in the pipeline planned for launch.

Speaker 7

Curious how many of those are for combustion engine vehicles and If you expect substantial growth in that market as well beyond electric vehicles or maybe that's not the focus. Thanks.

Speaker 3

Yes, Derek. Thanks for the question. We certainly have both types of vehicles inside of our portfolio. But the place that I think we're quite excited about the technology and the investments that we're making is in the electrical vehicle space. So I think most of our most of the vehicles inside our pipeline are EVs.

Speaker 3

And I think that's a great opportunity for us to Bring this always connected, always on, always updated software defined vehicle life.

Speaker 7

Got it. Thanks, guys.

Speaker 3

Thank you.

Operator

Thank you for your question. We are now taking the next question. And the next question from Shelly Wong from Morgan Stanley. Please go ahead. Your line is open.

Speaker 8

Hi. This is Shelly from Morgan Stanley. Thank you for taking my questions. I have two questions here. So first is about the revenue mix.

Speaker 8

If we look at the current, like the revenue breakdown, Like the sales of the goods are like the digital cook page still accounts for the majority of our revenue and the profit. So, do we have any target or priority on the future revenue mix like, do we want to do more hardware or software in the future?

Speaker 4

Thank you, Sherry. This is a very good question. So talking about the product A solution around the mix. So in the Q2, actually, we drove a significant growth in the software and the license Pao Shing, at the same time, yes, you are right. 70% of our revenues still came from the hardware and the cloud computing platform.

Speaker 4

And we keep optimizing our revenue mix, so we have high value added solution selling to the customers. So we're glad that we are able to keep our pricing and our margin stable and even we can improve our profitability step by step. So, I would say, going forward, we will keep doing that. And the ideal mix of our business Should be at least 60%, 70% still from our core computing platform. That is our fundamental solution.

Speaker 4

At the same time, we will drive Software and the service, physics like 30% to 40%.

Speaker 3

And Shelly, this is Peter. Just to add to that, We mentioned on this latest link in CoV-eight that we're also launching an autonomous system. So we have a number of additional launches on that Same EDCU system in our pipeline. I think we'll continue to diversify our product set beyond the digital cockpit into more Solutions like EDCU that require fantastic software and very solid computing platform, it's Right, within the core of our business. So we're definitely excited about that launch and its ability to increase our content per vehicle going forward.

Speaker 8

Got it. My first my second question is about the Baidu partnership. So we have recently entered the partnership with Baidu for the large language model. Can management share more color on like How we will collaborate with Baidu? And what are the future revenue opportunities from this partnership?

Speaker 3

Yes, certainly, I'll take that. I mean, the AI applications in the digital cockpit And across the number of different vehicle applications are quite exciting for E Car REx. So this is an opportunity we've been collaborating with Baidu For some time, I'm really excited to announce it. The customizations and capabilities that we think it can bring to the User experience inside the car are quite extensive. Certainly, there's very clear applications like improved voice control inside the car, and I think we'll continue to evaluate and expand how we can help customize the digital cockpit with these types of AI applications within them.

Speaker 8

Very clear. Thanks a lot.

Operator

Thank you for your question. We are now taking the next question. And the next question from Xiaoli Li from Jefferies. Please go ahead. Your line is open.

Speaker 9

Hi, thanks for taking my questions. I have 2 questions as well. The first one is, with increasing application of large language model to the vehicle end, We're seeing there are like higher requirements on the computing power of SoCs. I'm wondering how we Hopefully, this new trend on our next generation products on this front.

Speaker 3

Yes. Certainly, I mean, that's a trend that I think eCAREx has been participating in for some time this if you look across Our SoC roadmap, on a regular cadence, we continue to launch More capable computing solutions into the vehicle, and I think this will definitely continue. The Antares series that we launched Recently here, we're able to bring that to the vehicle, both in an Antara 1000 solution and an Antara 1 1000 Pro, which includes 2 SoCs. So it's a scalable solution that also is cost effective for the OEM to implement. So both of those systems will be in vehicles as we go through this year.

Speaker 3

And then in early 'twenty four, we've already announced the launch of our Makalu system, them, both in some geosomes as well as the smart brand, and that's very powerful computing power So I think those capabilities, we're excited what they bring to the car and they certainly will include a number of AI applications within those in those solutions.

Speaker 9

Thank you. My next question is about The service revenue, so we're seeing that the service revenue was down 36% year over year. So any guidance for the second half?

Speaker 4

Yes. So The subs revenue in the Q2 showed a negative 36% year over year, but we also grew by a loss of 45% quarter to quarter. The service revenue, the decline is primarily due to the timing difference. So So in the second half of the year, we are able to book low single non recurring engineering or R and D service field. So we are with that, we are able to restore our social revenue growth at a number level.

Operator

And the next question from Poy Fratt from Alliance Global Partners. Please go ahead. Your line is open.

Speaker 5

Yes, good morning. Thank you. Thank you for taking my questions. I apologize if it's redundant, but I had to log in and out So, can you just talk about gross margins? Gross margin percent was just a little bit over 31%.

Speaker 5

What's the outlook for the second half of the year and then looking into 2024 from that standpoint? And then Has your pathway to positive adjusted EBITDA changed at all? And you're looking for positive EBITDA in 2024. And do you think you can achieve positive EBITDA for the entire year or will be a first half Negative margin EBITDA margins in the second half positive, can you just give us a sort of an idea on that?

Speaker 4

Thank you. This is a good question. So for the margin performance actually, the team is fully committed to drive That drives the profitable growth. As I mentioned earlier, we have diversified product and solution offering in the market. At the same time, we keep evolving our offerings.

Speaker 4

We integrate industrial value for our customers. So that's why we drove really good momentum on Profitable growth in Q1 and Q2, and we believe that this momentum will continue. And For the full year, we have confidence to deliver our profitable growth as we mentioned earlier. Yes, at the same time regarding the EBITDA outlook, yes, Letting is working pretty diligent in our lean operation. So we drove a very effective operating expense control Year over year, as you can see, that is a minus 26% optimization year over year.

Speaker 4

And at the same time, that leaves our loan to deploy our savings to our strategic Area like in always expansion and advanced technology development. So, we will keep doing that and our profitability Target will be a match for sure.

Speaker 5

Great. And then if you could talk about the next generation, you Talked about Maluku or Maluku or Lou, sorry. Do you expect to have pricing leverage on that next generation Product or do you think that the competitive landscape will how will the competitive landscape impact Your ability to generate some pricing leverage on your next generation products?

Speaker 3

Yes, great question. I mean, we certainly operate in a very Competitive landscape, and we've done that quite successfully for a number of years. We believe The automotive industry in China in digital cockpit is certainly quite a competitive space. As we continue to launch new products, Whether that's the Antara 1000 Pro that I mentioned earlier, the Makalu that you discussed as well as the ABCU, I think we're quite excited about our ability to increase our content per vehicle across those applications. So as we look across our pipeline, As these solutions continue to bring additional capabilities into the vehicle, we definitely see some Level of upward momentum on our content per car.

Speaker 5

Great. Thanks for your time.

Speaker 4

Yes. Thank you. Thanks.

Operator

Thank you for your question. And we're now ready to take the next question. And the next question for Yaqing Ding from HSBC. Please go ahead. Your line is open.

Speaker 10

Thank you. This is Yutai from HSBC. I got 2. The first question, I think we briefly discussed a part of it. Looks like China is heading towards level 3 commercialization given the favorable policy and also more of the OEM join Club to launch the city autopilot functions and potentially we're going to see that rollout in more larger scale.

Speaker 10

So between level 3 and level 2, I think you briefly mentioned there is content opportunity, but could you shed a little bit more light in terms of like how our content per vehicle opportunity Distinguish between level 3 and level 2 and what's the margin profile difference over there? If we push this through more value addition software functions, How much like, if we could quantify that a little bit? That's the first.

Speaker 3

Yes. Sure. I'll take the first part of that question. I mean, when we look at the landscape in the ADAS space, We fundamentally believe that most of the applications in the short term will be level 2, level 2 plus. Getting a vehicle with Navigate on autopilot on the road for us is quite exciting, and I think we're going to continue to I'll be able to broaden that landscape of capabilities that we have in our Level 2 plus system, including parking functions and so on.

Speaker 3

So I think in the near term, we believe most of the volume will be in the level 2 space and level 2 plus space. But certainly, we have our eye on the Level 3 applications and are already working on a number of advanced development programs inside that space as well.

Speaker 10

Got it. So can we understand that in terms of Level 3 to 2, probably more software opportunity for us to explore?

Speaker 3

Yes. Certainly, as we get to level 3, there's more capabilities and more requirements from both the software and a computing horsepower perspective. So I think we will as I said earlier, we would expect to, in the future, Make additional announcements in our ADAS portfolio and roadmap and continue to broaden the capabilities of that product line.

Speaker 10

Got it. This naturally lead us to the second question. Help me solve a conundrum. We always think that the Where business would be very scaled, but under the premises that our customer would be use a standard a standardized software. But I guess you mentioned earlier, we have like over 30 projects in our pipeline.

Speaker 10

So I guess each OEM probably would also require a little bit Ad hoc work into that. So we saw some of the peers, they've been struggling because each OEM would want them to do different things. Therefore, you need to support a huge Personnel account for taking a different project, that makes that a little bit less scalable and a little bit more label heavy. But in order to get some software loaded in more vehicle in the future, you probably also need that kind of reengineering capability. So where are we In terms of these software business, Caloundra?

Speaker 3

Yes. I mean, when we look at our software teams, I think our organization is very focused on platforming. So whether that's across current generation or future generation products, reuse And expanding our feature set is definitely something our engineering teams spend a lot of time Investigate and ensure that we're kind of maximizing the reuse capabilities so that we can provide a competitive offering to the market. That being said, when we engage with customers on the digital cockpit solutions, There's certainly an element of customization, especially in the UI, UX area, and that's a place that we work very closely with our OEM partners.

Speaker 10

Got it. That's very clear. Thank you very much.

Speaker 4

Okay. Thank you.

Operator

Thank you for your question. There are no further questions at the moment.

Speaker 3

Okay. All right. Well, maybe we'll wrap the call up. Just certainly wanted to say thank you for everyone for joining And a great set of questions today. And certainly, if there are any follow ups, please feel free to reach out to Adam or Renee for any follow-up questions going forward.

Speaker 3

But thank you for the call today. Thank you.

Operator

And that concludes the conference for today. Thank you for participating. You may all disconnect.

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