Candy Technologies sees gross margin rise to 45.2% amid 39.3% revenue drop, focusing on strategic growth in intelligent equipment and new energy sectors.

OPERATOR - (00:02:33)

Hello ladies and gentlemen. Thank you for standing by for Kandi Technologies Group 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.

Kiwa Luo - IR Director - (00:02:56)

Hello everyone and welcome to Kandi Technologies Group 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@ir.candygroup.com Joining us today are Ms. Fong Chen, Chief Executive Officer, and Ms. Allen 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 US Dollars. I will now turn the call over to our CEO, Mr. Fong Chen, who will deliver his remarks in Chinese followed immediately by an English translation. Mr. Chen, please go ahead. Good day investors and analysts. Welcome to Kandi Technologies Group 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 macroeconomic 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 robotics and AI 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, but in a challenging environment, but also reaffirms our confidence in delivering sustainable growth over the long term. I will begin with a 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 into 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 its business operations from three key aspects. In product sales, our focus on inventory management within retail channels drove 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. 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 1050 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 feasibility, 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. Moving on to our emerging 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 embarked on a deep collaboration with Deep Robotics, a leading Chinese innovator in robotics and AI, to joining develop intelligent golf equipment and quadruped robots for SECurity inspections, leveraging our independently developed cloud Edge terminal intelligent computing system. These emerging smart devices are designed to precisely meet diverse market needs, unlocking substantial growth potential for our intelligent equipment business. 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 a pioneer through our subsidiary China Battery Exchange Zhejiang Technology Co. Ltd. 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 expansions. 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. 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 Allen Lin who will provide details on our financial performance. Thank you.

Allen Lin - Chief Financial Officer - (00:20:23)

Thank you Mr. Chen and Kiwa 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 gross 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 and 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's 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 30, 2025, the company had cash and cash equivalents. The received cash and certificates of deposit totaling 256.7 million compared with 126.3 million as of December 31, 2024. That concludes our remarks. I will now hand the call back to Kiwa for any final comments. Thank you.

Kiwa Luo - IR Director - (00:23:40)

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 Kandi Technologies Group. This concludes today's conference call. You may now disconnect.

OPERATOR - (00:24:01)

Thank you. This concludes today's call. Have a wonderful afternoon. You may now disconnect your lines.