SunCar Technology Group Inc.

Greetings and welcome to Suncar Technologies' full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jennifer John, IR Director. Thank you. You may begin.

Thank you and thanks everyone for joining us today for Sankar's full year 2024 earnings call. Please note that our earnings press release was issued yesterday and the annual report on Form 20F was filed with the Securities and Exchange Commission on April 28th. Both are available in the investor relations section of our website at http://sankartech.com. Join us on the call today are Suncoast Chairman, CEO Zai Changye, and Broker, Chief Strategy Officer. The format of today's call will begin with the opening remarks from Chairman Ye, followed by our financial and business update from Mr. Worker. Afterwards, we'll move into a question and answer session, addressing the questions submitted by investors. We thank everyone for submitting these questions. Before we get started, I'm going to review the Safe Harbor Statement. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may differ materially from the views expressed today. Further information regarding this and other risks and uncertainties are included in the company's annual report on Form 20-F for the year ended December 31, 2024, and in other documents filed with the U.S. Securities and Exchange Commission. Suncash technology does not assume any obligation to update any forward-looking statements, except as required under applicable law. With that, I would like to turn over the call to our first speaker, Mr. Zai Changye, Suncash's Chairman, CEO.

Good morning. Thank you, Jennifer. Suncar's business is 100% focused on digitalizing China's domestic auto insurance and services markets. Whatever happens in international politics, China still has the largest auto market in the world. Our target market has over 330 million drivers who still buy auto insurance and services offline. We remain dedicated to offering digital solutions to make those drivers' auto insurance and services experience more efficient and cost-effective. I am incredibly proud of the Suncar team's hard work in achieving this year's record revenue and profitability. I also appreciate our customers, including some of the world's most respected companies. Our revenue of $442 million and an almost 500% increase in adjusted EBITDA demonstrates sustainable growth as we scale the business. In 2024, our e-insurance business continued to experience strong growth due to our auto partners increasing focus on capturing insurance revenue. We are excited about the Tesla partnership, which grew to 48 cities from six earlier in the year. For Xiaomi, we built a customized insurance product that entered the market early in the year. We are excited about the innovation we are working on with all our auto partners. In the gas vehicle segment, we signed a contract with SAIC Maxis to enable its dealers to sell insurance more effectively. While EV sales have multiplied in China, the gas vehicle market is still much larger in terms of existing vehicles and insurance renewals. This largely untapped market represents a significant growth opportunity for Suncar. as car dealers desperately need our technology to capture downstream insurance revenue. In our auto services business, We see exciting growth opportunities in the retail and internet sectors while continuing to expand within our traditional bank and insurance customers. Our contract with Sam's Club demonstrates that the retail industry realizes Suncar's auto services can increase customer lifetime value. We supported Chanel's 2024 Hangzhou show in the luxury sector by providing high-quality transportation services for its VIP guests. Finally, Suncar is excited about innovation at its Angie AI Technology Service Center. Our investment in AI technology and software has had a very positive ROI as the products we are developing are proprietary and of significant value to our customers. We look forward to continued growth in 2025 as we execute on our considerable market opportunity

build deeper partnerships with our customers and accelerate our exciting product development efforts with that i'll turn it over to bro thank you zaichang and thank you all again for joining us as many of you likely saw i recently transitioned to the chief strategy officer role at suncar after serving as a consultant to the company for the past year during this time come to gain a deep respect for Suncar's team and the significant market opportunity in front of us. China's auto insurance market is rapidly transitioning away from the outdated offline processes and realizing the value in digitalization. Because the Suncar team has been in this market for almost 20 years, they deeply understand the nuances of this market transition. They saw this digitalization trend in advance and responded to the market opportunity. Our customers have clearly shifted their focus from new vehicle sales to optimizing and monetizing the customer's post-sale experience. This is where Suncar really shines, as our platform is very effective at driving downstream insurance, insurance renewal, and services revenue. As I have learned more about our customer relationships, I realize how much value our auto partners place on Suncar's platform and that they have a strong interest in working with us to develop new products. As the company increases its focus on software and AI-related product development, I'm excited about the increased value we're delivering to our partners. I didn't fully appreciate the breadth of the products we were co-developing with our partners until I went to our Angie AI Technology Center and saw the product demos. They were compelling in the innovative features inside the driver apps, and the customized management platforms for our EV partners. For those of you new to Suncar, I'll provide a brief background on the company and our business before discussing the year's operational and financial highlights, followed then by Q&A. Since our founding in 2007, Suncar has built technology to improve the process of buying and selling auto insurance and auto services in China. We operate in three segments, auto insurance, technology services, and auto services. In our auto insurance business, our cloud and mobile apps facilitate the sale of auto insurance underwritten by major insurance companies and sold by our network of over 64,000 sales partners. We receive commissions from the insurance companies based on a percentage of the premium paid by the policy holder. We have sales branches in 20 provinces in China giving us extensive coverage of the Chinese market. On the supply side, we have relationships and network integrations with 85 insurance companies, including the top 10 insurers with a combined market share of over 90%. Our cloud platform empowers our insurance company partners to manage all aspects of their business, including customer orders, products, commissions, and reports. Suncar has innovated extensively around the insurance sales process. Most notably, we have invented technology that produces an accurate quote within two minutes simply by scanning a license plate. For insurance buyers, our online and mobile insurance interfaces provide real-time quotes, pricing, underwriting, payment information, and access to a full spectrum of insurance products. Our hybrid cloud infrastructure provides secure storage and robust data analytics capabilities to support insurance companies and their end customers. In our auto services segment, we offer a network of customized auto services to enterprise customers, including major banks, insurance companies, and enterprises that have end customer demand for auto services. In a country without AAA or convenient access, to high-quality auto or transportation services, Suncar provides a valuable service to Chinese drivers. Our enterprise customers purchase access to our auto services as a benefit for the members of their rewards or similar customer marketing programs. Our extensive service network serves over 1,400 enterprise customers and customers. We have built our business on an industry-specific technology platform that enables and facilitates market-leading B2B auto services. We have secured 160 registered copyrights of computer software in this area. Our proprietary technology solution is based on a multi-tenant platform and cloud infrastructure. Our digital platform provides APIs, front-end interfaces, integration for enterprise customers, and efficient user-friendly management and operations tools for service providers. Our technology service business offers customers modular software management tools, such as customer relationship management, order management, finance management, and visual analysis systems running on our proprietary hybrid cloud platform. Auto service providers and insurance sales partners may use all or some of these online tools to manage their daily work, allowing us the opportunity to monetize the online software we built. In our insurance segment, one of the key themes of 2024 was the rapid growth of our partnerships with auto partners to develop new products and help them remain connected to drivers after the initial vehicle sale. As I mentioned above, the auto industry's new focus on downstream, wholesale revenue is a significant trend that positively impacts our business. We are developing applications in conjunction with our EV customers that enable them to stay better connected to customers and sell more downstream services such as insurance and maintenance. With Suncar's ability to embed or integrate its insurance app into our customers' existing vehicle apps, our increased collaboration with these partners continues to drive strong growth. In 2024, we launched a customized insurance product with Tesla China, which received very positive customer feedback for being user-friendly and valuable. Our product is helping Tesla acquire insurance customers more cost effectively while creating downstream revenue opportunities in maintenance and other services. Suncar is very excited about the success of our ongoing collaboration with Tesla, which has expanded to 48 cities nationwide from an initial six at the start of the year. We are working together to offer drivers the best possible insurance experience. We continue to develop our partnership with Xiaomi, where we began selling customized insurance products with their first vehicle deliveries. With Zeker, we've signed a contract that utilizes our SaaS platform to develop and integrate our insurance product into Zeker's app ecosystem. Our partnerships with other leading EV manufacturers have also progressed. These partners include NIO, Zeker, Li Auto, Xiaopeng, Ceres, Leap Motor, SAIC, and Chang'an Avatar. The success of our collaborations and the effectiveness of our insurance products have driven GMV growth beyond expectations. The company continues to expand its e-insurance business into the gas vehicle market. We secured a two-year agreement with SAIC Maxis, a leading commercial vehicle manufacturer, to enhance insurance sales management across its dealership network. For gas vehicle dealers, we are integrating our insurance systems directly into the dealers' existing insurance management systems, starting with the China and DePaul dealer group, we enable seamless insurance product sales at the point of vehicle purchase. We've hired four regional managers to support this rollout and drive adoption and dealer engagement. In our auto services business, we're excited about the growth in new segments, such as retail and luxury, and the expansion of our longstanding partnerships with China's leading banks, insurance, and auto companies. Committed to remaining the technology leader in the market, the company is utilizing AI extensively to improve the efficiency of our auto services network. Our luxury concierge service continues to experience significant expansion into new sectors. We provided high-end limousine services for leading luxury brands, including Chanel, Dior, and Omega, most notably supporting Chanel's 2024 Hangzhou show by providing high-quality transportation services for its VIP guests. In the retail sector, we signed an exclusive partnership with Sam's Club to offer car wash services for premium members across 17 major cities in China. Suncar is excited about our increased cooperation with China's major internet companies. Last year, we renewed car wash service agreements with Didi, Meituan, and Alipay. and signed a new car wash partnership with Goyin. We expanded our Alipay collaboration with their Car Life channel discounts into their Car God program. Finally, we launched a strategic partnership with Ant Fortune to offer exclusive airport limousine services to Ant Fortune Black Card V3 members, targeting high net worth clients. We continue to increase our cooperation with bank customers by offering new auto services to existing customers and expanding into new geographies. We increased our portfolio of 400-plus bank sector projects by adding 39 new projects in 2024. Key collaborations with national banks included working with CITIC Private Banking, ICBC, China Merchants, Bank of China, and Bank of Communications for airport transfers and travel services. On the regional bank front, we provided retail travel services to the Shanghai Rural Commercial Bank, designated driver services for Mengshan Bank and Agricultural Bank, and car wash and smart outbound calling services in three provinces for CCB, Dragon Card, and ICBC, respectively. Our relationship with insurance customers is multifaceted. We sell an increasing amount of auto insurance for them, while also being a supplier of auto services. Suncar has partnered with over 100 insurance branches, including the top 10 P&C branches of Ping An Insurance and 20-plus branches of China Continent Insurance. We have broadened our service scope beyond traditional offerings to include limousine transfers and EV charging, aligning with evolving customer and market demands. We will continue to leverage AI software and automation technologies to enhance operational efficiency, improve customer experience, and drive scalable growth. Regarding product development, we continue to build new features such as real-time fleet delayed notifications, intelligent order reminders, and call quality monitoring. These new features also streamline workflows and elevate service quality across our platform. Suncar has established its ING AI Technology Service Center to further extend its technology leadership position. We are leveraging proprietary AI development capabilities to co-develop products with our auto partners, which will increase the sales of new insurance policies, renewals, and extended warranties. Our development of AI enhanced customer engagement features has shortened service response times enhanced the cross-selling of insurance and non-insurance products, and increased customer satisfaction. We have expanded our insurance product portfolio by building customized vehicle-specific insurance products, which will now include loaner vehicles and repair subsidies for various sales channels. I'll now move to our financial report, which will be presented in U.S. dollars. For the full year 2024, we are pleased to report total revenue of $441.9 million, up 21.5% from $363.7 million compared to the full year 2023. This growth underscores the value we are providing to our large partners in the auto insurance business, the strength of our new insurance products, and our ability to meet the broad auto services needs of our enterprise customers. AutoE insurance revenue increased 44.4% to $170.5 million for the year ended December 31, 2024, compared to $118.1 million for the year ended December 31, 2023. This growth was driven by the leverage from our strong partnerships with automakers and an increase in insurance policies sold and the 12 months ended December 31st, 2024. Technology services revenue increased 46.4% to $44.9 million for the year ended December 31st, 2024, up from $30.7 million in the prior year. This increase was driven by strong demand from insurance companies and their sales partners for our software and services. The company's ongoing upgrades to its technology stack and use of a private cloud platform have simplified development and enhanced service capacity, enabling this rapid growth. Auto services revenue increased 5.3% to $226.5 million for the year ended December 31st, 2024, up from $215 million for the year ended December 31st, 2023. The increase was driven by the addition of 39 new bank sector customers and an increased number of completed service orders. Our operating costs and expenses increased to $500.3 million for the year ended December 31, 2024, compared to $379.2 million for the year ended December 31, 2023. Integrated service costs were $226.2 million in 2024. from $209.6 million in the previous year. These increases align with the growth in revenue from our auto services business and the significant expansion of our technology services business. Selling expenses were $22.6 million in the year ended December 31st, 2024, compared to $20.6 million in the year ended December 31st, 2023. This increase was mainly due to an increase in promotional expenses. General and administrative expenses increased from $22.5 million in 2023 to $47 million in 2024. This increase was primarily due to a $31 million increase in share-based compensation, expenses related to the 2024 equity incentive plan, and a $5.4 million increase in expected credit losses on accounts receivable. Research and development expenses increased from $14.1 million in the year ended December 31st, 2023 to $40.2 million in the year ended December 31st, 2024. The primary driver of this increase was the $31 million share-based compensation expense related to 2024 equity incentive plan, which was partially offset by a decrease of $4.9 million in technology service fees due to reduction in purchases of external services. We continue to strategically invest in R&D and business development as we grow our business relationships with some of the largest enterprises in China. Adjusted EBITDA, a non-GAAP metric that excludes certain non-recurring items and non-cash expenses, such as the compensation expenses related to the 2024 Equity Incentive Plan helps evaluate our operational performance in addition to the GAAP metrics. Our adjusted EBITDA increased by 492% to $9.8 million for the year ended December 31st, 2024, compared to $1.6 million in the prior year period. We believe this measure provides useful information about our operating results by excluding certain expenses that may not be indicative of our core business operating results. Reconciliation of adjusted EBITDA to net loss, the most directly comparable gap measure, is provided in our earnings releases and investor presentations available on the investor relations section of our website. To close, 2024 was a year of meaningful progress for Suncar. as we advanced our auto partnerships and AI cloud-enabled SaaS model. We have strengthened our recurring revenue base and positioned the company for sustained, scalable growth. Subject to risks such as regulatory changes, market competition, we remain focused on expanding our technology footprint, broadening our software and service offerings, and deepening the partnerships that fuel our success. The continued focus of our EV partners on enhancing the post-sale customer journey provides a powerful long-term tailwind for her business. For a detailed discussion of risks, please refer to our 420F filed on April 28th, 2025. Our ability to deliver a personalized driver experience powered by AI and our cloud platform remains at the heart of our strategy, and we believe it will continue to drive value for our customers and shareholders. With that, we'll now begin the question and answer session.

The first question we have, what impact, if any, will U.S. tariffs have on Suncar's business?

We don't currently expect U.S. tariffs will have a material direct impact on Suncar's business, as our business is 100% focused on China's domestic auto market. We continue to monitor indirect effects, such as potential supply chain disruptions for our partners. The rapid adoption of EVs and the digitalization of China's entire domestic auto market remain the primary positive trends for Suncar because we believe we are the leader in digitalizing this market.

Thank you. Our next question is, why have so many EV manufacturers been interested in partnering with Suncar and using your technology?

Our team has been in the market for almost 20 years and understands the evolving needs of the EV companies very well. Additionally, Suncar has invested approximately $100 million in its industry-specific cloud, AI, mobile apps, and data infrastructure. This investment is paying off as we built a very differentiated solution in the market. As our EV partners focus on their customers' post-sale journey, they realize that Suncar's insurance technology is the most mature and feature rich in the market.

How do you see your Tesla relationship evolving over time?

Tesla continues to be a strong partner in expanding our portfolio of insurance products and sharing our vision of delivering customized, full featured services to each driver.

Thank you. Our next question is, What do you attribute the rapid growth of your insurance business to?

Differentiation is key. The competition among EV and gas vehicle manufacturers has grown incredibly tough. For this reason, they are looking at other ways to monetize customer relationships beyond just the vehicle sale. Our technology plays a key role in their digitalization strategy and enables additional downstream revenue opportunities through sales and service options for vehicle owners. We are working collaboratively with these manufacturers to add additional services. This information is consistent with our prior public disclosures regarding market trends and our business strategy.

Congratulations on your strong adjusted EBITDA growth. How do you view your profitability tracking over the next year?

Thank you.

We're encouraged by our adjusted EBITDA growth and see the continued strong growth of our insurance business as a key contributor to this. Additionally, we are leveraging AI and other technologies to optimize our operations, positively impacting profitability.

Thank you. How do you view AI impacting your business in 2025?

We've been using AI in our business for well over a year. Its impact on our business has been significant as our team is finding new ways to use AI to optimize our operations and add new product features. On the product development front, we plan to integrate AI into as many features as possible to optimize the driver's experience and accelerate our customers' monetization efforts.

Thank you, Brock. How impactful will gas vehicle customers be on your insurance business this year?

As you heard in our insurance segment review, we're making great progress in penetrating the gas vehicle market. Suncar executives have been the featured speakers two years in a row at the largest gas vehicle dealer industry conference. Customer wins at SAIC and Chang'an DePaul dealer group testified that the gas market is accelerating its adoption of digital solutions to drive downstream insurance and maintenance revenue. We have had gas vehicle dealerships successfully using our products for some time. What is more recent is the industry's economic pressures have dramatically increased demand for our solutions from gas vehicle dealers. Their search for new revenue streams has reached a tipping point where they must digitalize to effectively capture as much downstream insurance and maintenance revenue as possible. Because the gas vehicle market is so much larger than the EV market in terms of existing vehicles, we think it can be very impactful to our business.

Our next question, what do you see as the future of your ONGIE AI Technology Services Center?

We see ONGIE and our engineering and product development teams playing an increasingly important role in our business. As we further develop our AI and software development capabilities, the ONG teams will play a critical role in innovating new insurance products. The ONG Center is key to working with our auto partners to co-develop custom insurance solutions that meet each of their specific needs and objectives.

Thank you. What do you see as the most exciting aspect of your services business?

Clearly, the emergence of customers from new sectors such as retail and luxury offer new areas of growth for this segment. Additionally, there exists opportunities to explore additional synergies with our insurance business. We believe an increasing number of our EV company insurance customers will want to add our auto services module to their existing insurance and other driver software.

Thank you, Broke. Next question, will you be issuing guidance this year?

We currently plan to issue guidance with our first quarter 2025 earnings release subject to market conditions and board approval.

Thank you. Our last question, do you expect there will be another large employee stock compensation expense this year?

No, we don't. Last year's employee stock compensation program was a one-time event under the 2024 equity incentive plan to retain and reward a core group of long-term Suncar employees who had been with the company for many years and were critical to our growth. We do not expect to incur a similar expense in the near future.

We have reached the end of our question and answer session, which includes today's conference.

Thank you for your participation. You may disconnect your lines at this time.