CBAK Energy Technology, Inc.

Good day ladies and gentlemen, thank you for standing by and welcome to CBEC Energy Technologies second quarter and first half of 2025 Earnings Conference Call. Currently all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder we are recording today's call. If you have any objections You may disconnect at this time. Now, I will turn the call over to Irina, IR Specialist of CBAC Energy. Irina, please proceed.

Thank you, operator, and hello, everyone. Welcome to CBAK Energy's earnings conference call for the second quarter and the first half of 2025. Engineers today are Mr. Zhiguang Hu, or Jason, Chief Executive Officer of CBAK Energy, Mr. Thierry Li, Chief Financial Officer and Company Secretary, and Yvonne, who will help with our interpretation, will join us for the Q&A section. We released our results earlier today. The press release is available on the company's IR website at ir.cbak.com.cn, as well as from the Newswell services. A replay of this call will also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US private security litigation reform act of 1995. Forward-looking statements involve inherent risk and uncertainties. As such, the company's actual results may be materially different from the expectation expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligations to update any forward-looking statements, except as required under applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars. With that, let me now turn the call over to our CEO, Mr. Zhiguang Hu, please go ahead, Jason.

Hello, everyone. Thank you for joining our earnings conference call for the second quarter and first half of 2025. As discussed last quarter, our Dalian facilities are undergoing a transition from model 26600, a small format battery that has been in use for nearly two decades, to model 40135, a much larger and more advanced model that enjoys strong market popularity. This transition has led to a sharp decline in Dalian's net revenues and gross profit. Given that we operate to major battery production base, any downturn in Dalian significantly impact our consolidated results. Meanwhile, our Nanjing facilities are facing supply constraints due to surging demand for our Model 32 140 cells. Phase 1 of our Nanjing plant, which began operation in 2021, is already running at full capacity. We reported Last quarter, they had phase two . However, its completion has been delayed by a few months to Q4, limiting our ability to fulfill additional pending orders. In short, Dalian is building a new production line for model 4035 cells. with all existing and prospective customers currently testing samples and awaiting mass production. Nanjing is operating at a full capacity and are able to accommodate further demand until phase two comes online. Since both the model 4135 production and Nanjing phase two expansion are expected to be ready in Q3 to Q4, we anticipate a strong recovery in our consolidated results by year-end. This situation explains the slowdown in our performance over the past two quarters. As of June 30, 2025, we reported net revenue of $40.52 million, down 15% from $47.79 million in the same period of 2024. The primary driver of the decline was a sharp reduction in sales to customers in the residential energy storage market who had previously purchased large volume of model 26600 cells. Sales in this segment fell by 44.8% year-over-year. As a result, the composition of our largest customer has shifted with significant growth in order from leading player in the possible power supply sector and top manufacturers in India's two- and three-wheeler market. Our strategy moving forward is to continue targeting high-quality European and American customers for our model 26,000, 32,140, and upcoming 40,135 sales. Well, further expanding our market share in India and the portable power supply industry with our model 32140 and 4135 products. We had previously decided in partnership with our customer to relocate part of our manufacturing lines overseas in response to U.S. tariffs on Chinese products. However, we have temporarily paused our Meridian project as a short-term solution and know that governments of both countries are currently engaged in active negotiation to reach an agreement. We believe it is prudent to monitor the outcome of these talks before committing to any major investment. That said, establishing battery some production capacity in the U.S. remains an element of our long-term strategy. We continue discussion with potential partners to determine the most cost-effective approach to realizing this plan. Now let me turn the call to our CFO, Xiewei Li.

Thank you, Jason. As Jason just mentioned, our net revenues declined primarily due to our strategic transition from a small format battery model to a larger, more advanced model. Alongside this revenue decline, we reported net losses attributable to Seabed Energy shareholders of 3.07 million and total net losses of 3.36 million. Of these, the battery segment accounted for 2.07 million in net losses while our raw materials production unit, HITRANS, reported net losses of 1.06 million. Despite weaker performance in our battery segment, HITRANS delivered a notably improved result. Net revenues for HITRANS reached approximately 19.43 million, up 59.36% from 12.19 million in the same period of 2024. Its net losses narrowed by 32.02% from 1.56 million in Q2 last year to 1.06 million in the same period this year. This improvement reflects Hytran's sustained efforts to expand its market presence. In the second quarter and first half of 2025, the unit successfully secured several new customers, driving growth in raw materials sales. Furthermore, A modest decline in raw material prices during the first half of 2025 stimulated customer demand and encouraged additional order placements. Looking ahead, we firmly believe that with the completion of our Product Portfolio Upgrade and Phase 2 19 project by year-end, combined with HITRAN's continued expansion into new high-quality customers and the ongoing recovery in the raw material prices, The financial performance of both high trends and our battery segment will see a strong rebound in near future. Thank you. We will now open the floor for the Q&A section. Operator, please go ahead.

Thank you. If you wish to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. We will take our first question, and the question comes from the line of Brian Lantier from Saks Small Cap Research. Please go ahead. Your line is open.

Great. Good evening, gentlemen. I wonder if you could talk a little bit about the competitive landscape right now and if you're experiencing any pricing pressures or if customers are really focusing on the products and the availability of your products.

The first question is, he wants to ask about our current production capacity and layout. If we have any difficulties regarding the increase in production capacity, including customer demand, please answer some related questions.

Mr. Hu, please answer a question about customer pricing pressure and future demand.

Okay. I think the price for first usually the price as you know now the battery technology technology developed very quick and every year the the performance such as capacity increased why the battery cell capacity increased because the high capacity can reduce the cost And the market right now is very sensitive for the cost. So CBAK transfer small battery to a larger battery cell to reduce the cost to meet the market requirement. And the volume, actually now the market volume is increased very quick too, because now For the market now need battery, such as consumer market and two wheels, three wheels, two wheels, three wheels market and electric vehicles. So the volume increase is very big.

Okay, thank you for that.

Sorry, Brian, let me add some points. I think following what Jason just commented, right now, most of the leading battery players in China are producing prismatic cells, which has much lower cost advantages over our technical route. However, right now, as you may know, all the manufacturers for cylindrical cells are actually trying their best to upgrade their product to a much larger battery model. So actually, the larger your battery will be, actually, the lower, the better cost-effective your battery is going to be. So our strategy is just to keep investing in the R&D programs to try to produce a larger size of our batteries. The project of 4135 is the one that we are currently investing. It's a major upgrade from 26650. The size will be much, much larger, which means that its cost will be effectively lower than our current product. In the future, as we always say, we are also investing in the R&D of the Series 46 which will be much larger than all the current products we have. We believe that with the time being and with all our R&D programs going very well, we will eventually have a very cost effective products in the market. And that product would target that all the major customer market that values, that will just pay attention, pay great attention to the costs including the two-wheeler and three-wheeler markets that Jason just mentioned.

Great. My next question was going to be on the 46 series cells. Where do you stand in that development, and when do you think, best-case scenario, you could actually be producing something like a 46950 or something along those lines?

The next question is to ask us Actually, now we make the research and development for the

Yuxiao Yang, series from already. Yuxiao Yang, More than two years and. Yuxiao Yang, We our target, we will achieve with my production of 46 there is now at the end of next year and. Yuxiao Yang, yeah.

Yeah, let me at some point, as Jason just say, we have already spent enough time on the R&D of series 46. We have probably a couple of actual models to choose 46120 or 46950. A lot of the models you choose actually depend on our major customers preference. I think the key elements determining when we are going to mass produce the series 46 is actually the capital because right now the equipment and production line for series 46 is extremely expensive at this moment unless we have securing significant orders from our customers, otherwise we will be very cautious about investing into this expensive production line, especially considering we have already two expansion projects at hand, a project for 4135 and a project for 3140. If we have a choice, we would like to complete a fundraising and then proceed with the construction of a production line for 46. Otherwise, we prefer the conviction of the current two project first.

Okay, great. That's helpful. Were there specific factors that caused the delay in the Nanjing expansion? Was it tied to uncertainty around possibly expanding in Malaysia first? Or was it difficulty securing equipment? If you have any color around what caused that delay, I'd appreciate it.

Next question is about us. What do you think is the main reason for the expansion of Nanjing 2C? Is it because Malaysia is expanding at the same time, or is there some other reason that led to the expansion of Nanjing 2C?

Mr. Hu, please answer my question.

It's like this. It's mainly our workers. Do you want to say it, or should I say it? I'll say it. Let me respond to this question.

I think the major issues causing the delay of our 19 project actually comes down to our equipment supplier. Some of our major equipment suppliers face problems sending over their equipment. So as a result, we have probably a couple of months of delay. We don't think we're going into any legal tussles with these suppliers because that would cause much longer delays. We are going to resolve these problems very soon. So, expectedly, we are going to, I think we're going to complete the expansion for this phase by the end of this year.

Okay, great. And just the housekeeping, have you been active? Have you disclosed yet if you've been active under the $20 million buyback and if you have how much capacity is still available under that buyback?

Well, yes. Up until we announced the stock buyback program, we did spend certain cash buying our stock back. I think we have so far spent about Roughly, we need to check the number, but roughly between $1.3 to $1.5 million at this moment, and the stock price was pushed up above $1. I think it's still strongly underestimated our company, but we will see how the market goes and determine when we're going to buy the stock back again. because the program is a one-year-long program. Okay, great.

Thank you for the update. I appreciate it. Thank you.

Thank you. Once again, if you wish to ask a question, please press star 1, 1 on your telephone.

Thank you.

Seeing no more questions in the queue, let me turn the call back to Jason for closing remarks.

Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.

Thank you all again. This concludes the call you may now disconnect.