With revenue up 76%, how far is Momenta from breaking even?

In its first interim report after listing, Momenta reduced its adjusted net loss to RMB 14.097 million, seemingly just one step away from breaking even.

At the earnings conference on the evening of August 31, management did not provide a timetable for profitability. Instead, they stated that rapid profitability in the short term was not the current goal, and that they would continue to increase investment in R&D, computing power, and global business commercialization in the second half of the year.

In the first half of this year, Momenta achieved revenue of RMB 1.602 billion, a year-on-year increase of 75.9%; gross profit of RMB 1.173 billion, a year-on-year increase of 79.4%, and gross profit margin increased from 71.8% to 73.2%. Among them, technology development revenue was RMB 995 million, a year-on-year increase of 81.5%; software licensing revenue was RMB 607 million, a year-on-year increase of 67.5%.

Both revenue streams come from the same mass production project. In the first half of the year, Momenta added approximately 321,000 new mass-produced vehicles equipped with the software, representing a year-on-year increase of 83.7%, bringing the cumulative total to over 1 million vehicles. The number of delivered models increased to 105, with a cumulative total of 219 designated models, of which 114 have not yet been delivered. Designated projects initially contribute development revenue; once the models are launched and generate sales, the revenue is converted into software licensing revenue calculated based on vehicle installations.

During the earnings call, management stated that the growth in technology development revenue was primarily driven by an increase in global OEM customers and improved delivery efficiency, while licensing revenue was boosted by increased penetration of city NOA (Normally Occupied Area) systems and the increase in mass-produced vehicles.

Currently, vehicles equipped with Momenta's solutions have entered 10 countries and regions. Momenta is not only following Chinese automakers in their overseas expansion but also advancing local production projects for international automakers. Overseas regulations on advanced autonomous driving are being relaxed more slowly than in China. These projects currently contribute more to development revenue, and converting them into large-scale licensing revenue will have to wait until the vehicles are put into production.

Price pressures are already emerging. Momenta acknowledges that the domestic car price war is spreading to the supply chain, and as production expands, future licensed prices per vehicle may be adjusted through tiered discounts. Increased vehicle volume may not translate into proportional growth in licensed revenue; the amount of gross profit that can be retained depends on the magnitude of price reductions and the speed at which delivery costs decrease.

Delivery time and manpower are also being reduced. Management stated that what used to require approximately 400 people and two years to complete a single vehicle model project can now be reduced to a few dozen people and about three months. The company aims to deliver approximately 40 models by the end of 2025, with 37 already delivered in the first half of this year. The company has also kept accounts receivable turnover days to approximately 105 days, and net operating cash outflow has narrowed by 46.8% year-on-year to RMB 381 million.

In the first half of the year, Momenta's R&D expenses reached RMB 1.163 billion, a year-on-year increase of 18.6%, while total operating expenses were approximately RMB 1.593 billion, still higher than the gross profit in the same period. The adjusted net loss decreased to RMB 14.097 million by including gains from the fair value of wealth management products and exchange rates.

According to legal accounting standards, Momenta's net loss reached RMB 16.537 billion, mainly due to non-cash fair value changes of approximately RMB 16.311 billion in financial liabilities such as preferred shares. Since the relevant preferred shares have been converted after listing, this loss will have a limited impact on subsequent operations.

The narrowing losses have not changed Momenta's spending plans. The R7 world model will gradually be integrated into production vehicles in the second half of the year. Momenta states that the new solution uses the same sensor and chip configuration as the R6, primarily improving performance through software upgrades, without requiring automakers to increase hardware costs. This year, the cloud GPU scale is planned to expand from 20,000 to a maximum of 60,000, with a target of increasing actual road data to 24 billion kilometers. The first production Robotaxi model will also be launched in the fourth quarter, with plans to deploy several hundred vehicles by the end of the year.

Momenta is also experimenting with different pricing models. They are discussing intelligent driving subscription models for consumers with automakers. Management stated that in some partner models, the selection rate for high-end intelligent driving packages priced over 10,000 yuan exceeds 80%. Momenta plans to promote the mass production of L3-capable vehicles by 2027, adding a continuous revenue stream beyond one-time software licenses. Currently, this revenue stream has not been disclosed separately.

This data also illustrates that third-party intelligent driving suppliers face two sets of cost rules simultaneously. On the revenue side, they follow the automotive supply chain and have to bear the pressure from OEMs to lower prices and apply discounts based on scale; on the expenditure side, they are more like AI companies, where model training, computing power, and engineering delivery cannot be stopped. Increased vehicle installations do not automatically translate into profits.

The industry's assessment of third-party intelligent driving suppliers cannot be limited to the number of designated suppliers. The number of additional personnel and computing power required to deliver the next model directly impacts the profit margin of any new revenue. Customizing each model and having more designated suppliers increases delivery costs; only when models and toolchains can be reused across different models can economies of scale reduce the cost of individual projects.

Momenta has 114 designated models awaiting delivery. The unit delivery cost when these projects are converted into revenue will determine how quickly the 420 million yuan operating deficit can be narrowed.

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