CBAK Energy Technology, Inc.

Ladies and gentlemen, thank you for standing by and welcome to CBAC Energy Technologies' fourth quarter and full year 2025 earnings conference call. Currently, all participants are in 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 Tian, IR Specialist of Seabank Energy. Ms. Tian, please proceed.

Thank you, operator, and hello, everyone. Welcome to Seabank Energy's earnings conference call for the fourth quarter and the full year of 2025. Joining us today are Mr. Zhiguang Hu, Chief Executive Officer of Seabank Energy, Mr. Jie Wei Li, Chief Financial Officer and Company Secretary, and Evan who will help with our interpretation during the Q&A session. We released our results earlier today. The press release is available on the company's IR website at ir.cpac.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 U.S. Private Secretary Liquidation 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 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 on the applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. 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 early conference call for the fourth quarter and the full year of 2025. The fiscal year 2025 was a definitive transitional period for CBK Energy, characterized by a comprehensive structural upgrade of our product portfolio. Aggressive capacity expansion and deliberate peer work towards next-generation form factors. Despite the short-term, bottom-line pressure inherent to submissive capacity transitions, our top-line growth demonstrated explosive momentum in the fourth quarter. consolidated net revenue surged by 131.80% year-over-year to 58.80 million dollars. For the full year consolidated net revenue reached 100.19 million dollars representing an 11 increased 11% increase over 2024. Let me detail the structural transition driving our corn business. At our Dalian facility, our customer are actively transitioning away from our legacy 26 series factory, our product line with over a decade of history and the one GWh of capacity to our newly introduced highly advanced model 4135 cells to support these per shift. We successfully commissioned a new 4135 production line with 2.3 kWh capacity at the end of 2025. so market reception has been truly unprecedented. Demand for the 4135 cells currently far exceeds our available supply, meaning we are selling every single unit we can produce, and our order book heavily outpays our current ramp-up trajectory. Similarly, at our 19 facility, to alleviate the severe supply for our highly sought after model, 32-140 cells, we successfully added two new production lines at our phase two facility at the end of 2025. This expansion at 3.0 GWh of much needed capacity to complement the 1.5 GWh already operational in phase one. And we expect these two new high-speed lines to reach full capacity by early 2027. Both our Dalian and Nanjing expansion are currently in an intensive capacity ramp-up phase While this initial phase carries higher unit costs that have temporarily surprised our growth margin and the short-term profitability, we view this as a necessary and highly strategic investment. As our customers complete their transition to the Model 4135 and our Phase 2 facility completes is ramped up by early 2017. We anticipate a dramatic and sustained resurgence in our top-line revenue. Furthermore, to ascend the value chain starting in 2025, our wholly-owned service-serving 19 BSD initiated dedicated dedicated battery pack integration operation by assembling individual cells into complete plug-and-play battery system. We bypass intermediate integrators to serve end-user directly. Currently, these manufactured pack units are predominantly engineered for the light electric vehicle battery swapping infrastructure throughout the african market in 2025 we officially forged a deep strategic partnership with spiral one of africa's largest two ruler battery swapping enterprises i'm thrilled to report that spiral has rapidly scaled to become one of our top file customers We are incredibly proud that our advanced battery cell technology is providing the essential momentum for Africa's new energy transition. To deepen this relationship, we are actually exploring further collaborative models, including the potential establishment of a dedicated cooperative entity We see the African region to directly assist and accelerate Spiros' localized business expansion. This African success is mirrored across other key international markets, driving our explosive global growth via revenue from LEVs skyrocket by 252% year-over-year to $36.36 million for the full year. In India and a broader global market, our institutional client base has expanded significantly. We have established deep collaborations with a highly prestigious roster international blue-chip customer, including Anker Innovation, Scania, which became our direct ordering entity following its acquisition of North World Business Unit that originally procured our products, now operating under Bucida, as well as Acer Energy, Shenzhen ACE Battery, and Inverted Energy, The endorsement from these global tier one enterprises provides the strongest possible validation of our product reliability and safety. Similarly, in Vietnam, we have a tight-knit partnership with a key client, DAT. As DAT business volume has scaled, our shipment volume in the Vietnamese to rural sector has experienced exponential growth. As the investor may be aware, the PRC government has initiated a phase-out policy for export tax rebates, reducing the rate for lithium ion battery from 13% to 9%. with further reductions to 6% by April 2026 and a complete elimination by January 2027. To proactively establish a dialectical couch against this microeconomic headwind and protect our international margins, we moved decisively to localize our global supply chain. We have already incorporated our Malaysian subsidiary on April 30, 2025, and are actively pushing forward with physical construction of manufacturing facilities there. We've seen this year to offer diversified tariff-insulated sourcing opinion for our top-tier international clients. We also anticipate signing and announcing additional contracts with major international clients soon, which we believe will serve as a strong catalyst for our shareholders. Our raw material segment High trunks delivered a power turnaround benefiting from an ongoing upward cycle in raw material price. High trunks experienced a sharp operational rebound beginning in the third quarter of 2025. Full year revenue for this segment surged 123% year over year to $89.21 million. As the raw material pricing cycle continues its robust upward trajectory, we confidently anticipate HITRONs will reach new performance highs. To structurally capture this moment term, HITRON is aggressively expanding its proprietary infrastructure, including the ongoing construction of new 10,000 metric ton tensile manufacturing plants slated for full operation in the fourth half of 2027. Alongside a massive 37,000 metric ton This strategy propensity injection will decisively elevate high-trans revenue selling in 2026 and beyond. Strategically, we are also advancing our cooperative structure. Our stockholders have approved radar missile merger to change our place in cooperation from Nevada to Cayman Islands. This move will allow us to streamline operational and administrative efficiency while similarly aligning our cooperative structure with our aggressive international expansion strategy. driven by the insatiable demand for our new 4135 and the 32140 battery cell, the impending completion of our capacity ramp-ups, the continuing strength of HITRON and our expanding footprint across global LEV market. We project with absolute confidence that our consolidated sales will hit a record high in 2026, delivering explosive growth. Now let me turn the call to our CFO, Jay Wei Li, for a deeper dive into our financials.

Thank you, Jason. 2025 demonstrated the resilient, dialectical nature of our vertically integrated business model. While our battery segment faced margin compression due to the aggressive ramp-up of our new production lines and rising raw material costs, our high-trend raw materials segment capitalized on this exact macroeconomic environment. Looking at our fourth quarter results, consolidated net revenues reached $58.8 million. a 131.8% increase compared to Q4 2024. This hyper growth effectively decoupled from the temporary bottom line pressures caused by our ongoing capacity transitions. Within this, our battery business revenues were about $30.82 million, an increase of 35.8% year over year. Despite a 10.6% decrease in the energy storage structure caused by the phase-out power magazine model 26650 sales at Dalian, we offset this decline through explosive growth in the LEV revenues, which skyrocketed by 524.2% to $12.92 million in the fourth quarter. Our high-trend segment generated $27.98 million in Q4 2025, a massive 944.1% surge from Q4 2024, directly reflecting the escalating upward cycle of raw material pricing and robust downstream order placements. Our gross profit for Q4 2025 was about 4.28 million, representing a gross margin of 7.3% compared to 13.1% in Q4 2024. This sharp margin compression was fundamentally driven by the transactional friction costs, suboptimal use, and disproportionately high fixed cost absorption inherent to the initial ramp-up phase of the new Model 4135 in Dalian and Phase 2 Model 32140 lines in Nanjing. Consequently, operating loss for the fourth quarter was about 8.01 million dollars. and the net loss attributable to shareholders was $7.38 million. For the year 2025, net revenues were $195.19 million, up by about 11% year-over-year. Hightrends contributed $89.21 million, up by 123%, while the battery business contributed $105.98 million. Gross profit for the year was about $18.42 million, representing a margin of 9.4%, down from 23.7% in 2024. Operating expenses increased to $36.86 million, up 12% year-over-year, driven by a 21% increase in R&D to $15.8 million. This delivery expansion directly funded our next generation technology roadmap, specifically accelerating the development of our advanced large format synergical models, such as the 6115, 6135, and 6150, as well as highly specialized sodium ion chemistries engineered for the extreme low temperature resilience and fast charging capabilities. We also increased by 16% in G&A to $16.20 million, reflecting increased headcount for our new production lines. Our full year operating loss was about $18.64 million, and the net loss attributable to shareholders was about $978 million. However, analyzing the bottom line requires a dialectical view of our risk management framework. Our other income surged to $8.27 million, fundamentally bolstered by a highly lucrative $5 million compensation payment we strictly enforce and successfully collected from a canceled customer order. This underscores the robust legal and contractual protections we secure in our commercial agreements. Second, to proactively shield our margins from global volatility, marked our inaugural deployment of a sophisticated financial hedging structure. We systematically executed foreign currency for work contracts, options swaps, and commodity contracts, while this proactive risk mitigation resulted in a calculated non-cash derivative fair value loss of approximately $0.44 million dollars. It effectively neutralized extreme macroeconomic fluctuations and provided essential cash flow predictability for our supply chain. Turning to our balance sheet and liquidity, our financial foundation remains robust and highly liquid. As of December 31st, 2025, we held cash and cash equivalents and restricted cash of $75.68 million. an increase from 60.79 million at the end of 2024. Notably, despite the reported net loss, our net cash provided by operating activities was extremely strong at 48.55 million for the year, compared to 39.70 million dollars in 2024. This powerful cash generation was primarily attributable to disciplined working capital management, including a $63.66 million increase in trade and bills payable. We allocated $44.65 million to capital expenditures in 2025 to fund the aggressive construction and equipping of our new production facilities across Dalian, Nanjing, Zhejiang, and Anhui. In summary, the temporary margin squeeze is a calculated byproduct of scaling next-generation capacity with the high-tech segment provided by . Our battery capacity ramp up schedule for the conviction in early 2027, and our deeply integrated global expansion progressing rapidly. We are structurally positioned for massive operational turnaround and record-breaking sales. Thank you, and we will open the floor for the Q&A section. Operator, please go ahead.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. Thank you. We will now take the first question. Question is from the line of Brian Lantier from Zach's Small Cap Research. Please go ahead.

Good evening, everyone. Fantastic news to see high trends suddenly turning things around. I wonder if you could talk a little bit about where you see gross margins in the battery business and when you think they might normalize as you ramp up capacity.

Thanks. Thank you, Brian. Let me answer a question. So I think it's back in Q3 and Q4 when our Nanjing Phase 2 and our Dalian operations and new products kick in. Our growth margin was affected severely. So right now we are in a phase of ramping up capacity, and we believe that the Dalian facility ramp-up would be completed in the first half of this year. which we have already received way enough orders for this new product. And for Nanjing phase two, because it's much bigger, so our timeline is for early 2027, but we have confidence to try our best to catch up the timeline. So our target would be also the second half of 2026. But the reasonable timetable will be early 2027. So Ideally, in the second half of this year, our gross margin will gradually rebound, and I believe in the full year of 2026, the gross margin number at least looks better than right now.

Great. Thank you. And could you describe a little bit more about the cell packing business, and do you see that becoming a growth opportunity for the company? particularly in the LED market?

I will answer the question first, and then even please help with the interpretation for Jason. Jason, I think, can add some points. So we have received a substantial order from one of our major African customers who actually are originally from India. And starting early 2025, this substantial order kick in and they use most, I think all of the sales and purchase were from 1930 to 140. And in order to do that, we have already set up a battery pack assembly unit within our structure. And this unit is dedicated to purchase sales from our 19th factory and put the sales into a battery pack and sell it to the African customer. And this customer has already become one of our top five customers as of 2025. And we are also looking forward to a much deeper and more comprehensive collaboration with each other. Maybe in the future, our collaboration will extend beyond the area of LEV into energy storage sector. So I think this is what I want to add. Please, Jason, if there's anything you want to add.

Mr. Hu, the question here is more about the assembly of our module, especially the future growth. What do you think? Especially in the car industry, Just now, Mr. Jay Wei has probably said that we currently have an independent department operating this part of the electronic assembly. Then mainly use us to buy our Nanjing 32140 products and then use the assembly of the light car and then sell it to Africa. At the same time, we will also consider doing some ESS main energy aspects. Apart from that, do you have any other questions about the market that you need to add?

There's only one thing that Jason would like to add, which is

the advantage of our battery cell using the LEV market. So this has already been demonstrated in the Southeast Asian market and Indian market. So our product, no matter our cell or battery pack, performs really well in high temperature. This is very critical to this kind of application. So we think we may meet the same success as we already did in the Southeast and Indian market.

Great. Thank you. That's really helpful. I guess one final question. Are you seeing anything on the energy storage front as it relates to grid storage, best companies, and is that impacting your R&D plans for new cell formats that could come out at the end of the decade?

I think that's a question for Jason.

Yes, the next question is whether we have any new progress in terms of storage. For example, in some big stores, are there any plans for development? For example, research is a new type of battery to be used in this big store. Then this plan can be in the medium term in the next 10 years.

At present, we are mainly focused on the family soil, as well as the Yangtze and Bianxie soil. These three markets are currently mainly used in our large-scale products. At the same time, we are also doing large-scale sustainable development. In the future, it is possible to realize mass production in our new factory. Our large-scale is sustainable in the development.

So currently for the ESS market, I think we are only focusing on the home ESS, balcony ESS, and also portable ESS, which are all smaller size. But in addition, we are also in research and development of our big prismatic cell, which can be used in what you just mentioned, the great size energy storage system. So that will be one of our target products for this

Great. Thank you very much.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, you can press star 1 and 1 again. We will now take the next question. This is from the line of Charles Nemec, individual shareholder. Please go ahead.

Hello and good morning. Now I've reviewed the 40135 ramp up data and the margin compression. And I have a structural and validated solution for the thermal wall and charging limitations impacting your daily in production. Now I submitted a brief to your executive inbox and I sent one to your engineer as well and I'm just wanting to confirm that you've received that and if we could make a time to discuss those matters in a private forum.

Which engineer or which email address you contacted to?

The email I sent it to is, let me find it here. IR at CBAC.com.cn.

Okay. There are just daily, there are thousands of emails coming in. So it may be in the junk box or maybe it's just be in front of it. So can you just resend the email and we'll make sure that related personnel would just look into it.

Okay. I can resend them all. I sent them on the 28th. Early in the morning, but I can resend them. There's one to the CEO, the second in command, and your engineer that all you've got to copy through that email, and I tagged you all. Okay. We'll just review it. Okay. Well, thank you very much. That's my only question to see if you've gotten that.

Thank you. Seeing no more questions in the queue, so 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 all again. This concludes the call. You may now disconnect.