Kandi Technologies Group, Inc.

Hello, ladies and gentlemen. Thank you for standing by for Candy Technologies Incorporated earnings conference call for the first half of 2025. At this time, all participants are in a listen-only mode. Today's conference is being recorded. I will now turn the call over to your host, Ms. Kiwa Luo, the IR Director of the company. Please go ahead.

Hello everyone and welcome to Candid Technology's earnings conference call for the first half of 2025. As a reminder, today's call is being recorded. The company's financial and operational highlights were issued in a press release earlier today and are available online. You can access the earnings press release and subscribe to the company's email alerts by visiting the investor relations section of our website at ir.candigroup.com. Joining us today are Mr. Feng Chen, Chief Executive Officer, and Mr. Alan Lin, Chief Financial Officer. Before we begin, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation 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 expectations expressed today. Further information regarding these 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. Unless otherwise noted, all financial figures discussed today are in U.S. dollars. I will now turn the call over to our CEO, Mr. Feng Chen, who will deliver his remarks in Chinese, followed immediately by an English translation. Mr. Tan, please go ahead.

各位投資者、分析師,大家好。 歡迎各位參加康迪科技2025年上半年度業績電話會。 非常感謝大家抽出訪會時間與我們一同回顧公司上半年的業績表現。 Good day, investors and analysts.

Welcome to Candid Technology's earnings conference call for the first half of 2025. We sincerely appreciate your taking the time to join us as we review the company's first half performance.

In the first half of 2025, the global global economic environment is still facing a lot of uncertainty, and this trend has brought a lot of challenges to our business development. However, with the outstanding hardware capability of the company, we have still achieved significant strategic progress. While stabilizing traditional non-trailer vehicle business, we combine our own advantages to actively deploy giant smart and new energy infrastructure areas. Through the landing of multiple important cooperatives, we gradually completed the strategic transformation from traditional manufacturing companies to smart equipment manufacturing as the core control platform company.

In the first half of 2025, the global microeconomic landscape remained clouded by considerable uncertainty, creating real headwinds for our business. Nevertheless, thanks to our agility and strategic foresight, we made substantial progress on several key initiatives. While enhancing our traditional off-road vehicle operations, we also leveraged our core strengths to expand into the emerging fields of embodied intelligence and new energy infrastructure. Through the confirmation of several pivotal partnerships, we steadily advanced our transformation from a conventional manufacturing enterprise into a holding platform with intelligent equipment manufacturing at its core. This transformation initiative not only speaks to our resilience in a challenging environment, but also reaffirms our confidence in delivering sustainable growth over the long term.

首先,我将重点介绍公司在主营业务方面的最新进展。 经过上半年的调整与升级后,我们进入了精细化运营的新阶段。 I will begin with an update on the latest developments in our core business.

Following the adjustments and upgrades made in the first half of the year, We have entered a new phase of refined operations with the goal of delivering steady, high-quality growth. Through more efficient resource allocation, inventory optimization, and disciplined cost control, we are gradually improving our profitability and strengthening our cash flow management. Let's look more closely at this business operations from three key aspects.

In terms of product sales, we focused on inventory management of retail channels, and the interest rate significantly increased to 45.2%, which is 31.7% in the same period of 2024, which increased by 13.5%. This fully reflects the effective measures of the company in precision operation and cost control. At the same time, In product sales, our focus on inventory management within retail channels shows a notable improvement in gross margin

to 45.2% for the first half of 2025, up 13.5 percentage points from 31.7% in the same period of 2024. This reflects the effectiveness of our refined operations and cost control initiatives. Meanwhile, by optimizing our internal production structure and streamlining assembly line processes, We have enhanced manufacturing efficiency and shortened delivery cycles, further strengthening product delivery reliability.

在销售渠道方面,我们力求实现更加均衡的布局,形成更广泛的触达与服务能力。 我们不仅巩固与Laws等大型零售商超的合作 还进一步扩大经销商网络 目前产品已入驻1050家零售商超门店 且经销商网络呈稳步增长态势 经过新销售团队的努力 截止6月底 经销商与零售商的销售结构 从以前的1比9

Second, on the sales channel front, we are creating a more balanced and strategic distribution layout to enhance both our market penetration and service capabilities. To that end, we have reinforced key partnerships with major retailers, including Lowe's, while further expanding our dealer network. Our products are now carried in 1,050 retail outlets with our dealer network demonstrating steady growth. Thanks to the concerted efforts of our new sales team, the dealer to retail sales mix has improved from 1 to 9 previously to 2 to 8 as of the end of June, reflecting a more diversified and resilient channel structure.

Beyond our traditional sales channels,

We are actively exploring high margin direct-to-consumer channels, e-commerce platforms, and major distributor networks. While evaluating and optimizing the long-term profitability of our key account partnerships, we aim to achieve an optimal balance among brand visibility, market share, and profitability.

Finally, we have proactively accelerated the design and development of several new products.

The design schematics are finalized, and we anticipate launching these products by the middle of next year. Their introduction will provide new growth momentum, broaden our product portfolio, and further enhance our market competitiveness.

In the new business field, we have always maintained a sharp market insight and innovation driving spirit. Moving on to our Immersion Business segments.

Supported by Keen Market Insights, we maintain an innovation-driven approach to these segments. With particular emphasis on intelligent equipment and new energy infrastructure, let me walk you through our latest initiatives in those two fields.

In the first half of this year, we and China led the giant smart innovation enterprise, Hangzhou Cloud Deep Technology, to open a deep cooperation, jointly develop smart golf equipment and security inspection four-组机器人,基于自主研发的云边端自算系统,这些新兴智能装备将精准满足市场多元化的需求,进而为公司智能装备业务拓展提供巨大的增长潜力。

In the first half of this year, we embarked on a deep collaboration with Deep Robotics, a leading Chinese innovator in embodied intelligence, to jointly develop intelligent golf equipment and quadruped robots for security inspections. Leveraging our independently developed cloud edge terminal intelligence computing system, these emerging smart devices are designed to precisely meet diverse market needs, unlocking substantial growth potential for our intelligent equipment business.

在新能源技术设施领域, 换电技术依然是我们重点布局的方向。 康迪科技早在十几年前便致力于推动换电技术的普及与应用, 是行业的开拓者和先行者。 In the new energy infrastructure sector,

Battery swapping technology remains a key strategic cornerstone for us. Candy has been advancing the adoption and application of this technology for over a decade, establishing ourselves as an industry pioneer. Through our subsidiary, China Battery Exchange, Zhejiang Technology Company Limited, We have become a supplier of heavy truck battery swapping station equipment to CATL, the global leader in power batteries, and have successfully secured our first order to support the rollout of its ambitious 10,000 stations plan. This collaboration not only strengthens our technological leadership, but also positions us to generate substantial revenue.

Before I conclude, a brief look at our financial position.

As of June 30, 2025, the company held $257 million in cash, cash equivalents, restricted cash, and certificates of deposit. Our balance sheet remains exceptionally strong, providing ample liquidity to support both our strategic growth initiatives and ongoing business expansion.

Looking back at the first half of 2025,

In summary, Candy demonstrated resilience and a strong capacity for sustained growth

amid external challenges and internal transformation during the first half of 2025. Despite some short-term volatility, we believe our disciplined focus on optimized operations, strategic recalibration, and technological innovation has positioned the company for long-term development.

In the field of stable cash flow business and double engine strategic guidance for growth and incubation business, we will deepen the non-road vehicle field, and at the same time establish smart equipment and new labor market through steady and continuous innovation. In the future competition, the company will work hard to create greater value for shareholders and investors.

Looking ahead, we are confident in our dual-engine strategy, balancing stable cash flow businesses with growth incubation businesses. Through disciplined execution and continuous innovation, we will strengthen our position in the off-road vehicle sector while strategically expanding into intelligent equipment and new energy markets, maintaining our competitive edge and creating long-term value for our shareholders and investors. Now, let me turn the call over to our CFO, Alan Lin, who will provide details on our financial performance. Thank you.

Thank you, Mr. Chen and Kewa, and thank you everyone for joining us today. I will go over our unaudited financial results for the first half of 2025. The net revenues were $36.3 million, down 39.3% from $59.8 million for the same period of 2024, primarily reflecting the lower sales of off-road vehicles and EV products. The cost of goods sold was $19.9 million, a decrease of 51.3% from $40.9 million for the same period of 2024. The decrease was primarily due to the corresponding decrease in sales. The gross profit was $16.4 million, compared with $19.0 million for the same period of 2024. The growth margin improved significantly to 45.2%, up from 31.7% last year, driven by more favorable product mix and regional revenue distribution, as well as increased sales of previously impaired inventory. The total operating expenses were $18.3 million, a decrease of 21.4% from $23.3 million for the same period of 2024. Regarding the breakdown for expenses, research and development expenses were $2.5 million, up 48.5% from $1.7 million for the same period of 2024, mainly due to a battery product R&D project launched in the first half of 2025. The selling and marketing expenses were $4.5 million, down 35.8% from $7.0 million for the same period of 2024. The decrease was comparable with the scale of decrease in revenue. The general and administrative expenses were $11.3 million, down 22.6% from $14.6 million for the same period of 2024. The decrease was mainly due to a lower depreciation resulting from the long-lived asset impairment recorded at the end of 2024 and reduced stock-based compensation expenses compared with the prior year period. The net income was $1.7 million compared with $2.4 million for the same period of 2024. The basic and diluted net income attributable to the company stockholders per share were $0.02, compared with $0.03 for the same period of 2024. Turning to our balance sheets, our financial position remains strong. As of June 30th, 2025, the company had cash and cash equivalents that received the cash and certificates of deposit totaling $256.7 million, compared with $125.3 million as of December 31st, 2024. That concludes our remarks. I will now hand the call back to Kewa for any final comments. Thank you.

Thank you once again. for joining us today. If you have any further questions, please reach out using the contact information provided on our website. We appreciate your time and interest in Candid Technologies. This concludes today's conference call. You may now disconnect. Thank you. This concludes today's call.

Have a wonderful afternoon. You may now disconnect your lines.