Kandi Technologies Group, Inc. ($KNDI)

Greetings. Welcome to Kandi Technologies Full Year 2025 Financial Results Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to Kewa Luo, IR Director. Thank you. You may begin.

Hello, everyone, and welcome to Kandi Technologies Group Full Year 2025 Earnings Conference Call. As a reminder, today's call is being recorded. The core financial and operational highlights were issued in our press release earlier today and available online. You can access the earnings press release and is subscribed to the company's e-mail alerts by visiting the Investor Relations section of our website at ir.kandigroup.com. Joining us today are Mr. Feng Chen, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Before we begin, please note that today's discussion will contain forward-looking statements made under the safe harbor portions 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 obligation 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 English translation. Mr. Chen, please go ahead.

[Interpreted] Good day, investors and analysts. Welcome to Kandi Technologies Earnings Conference Call for the full year 2025. Thank you for your continued interest in and support of us. 2025 was a pivotal year for Kandi. The past 2 years have been defined by a challenging macro backdrop marked by evolving geopolitical, shifting trade policies and uneven demand across our end markets, which weighed on our operating performance. We are clear-eyed about near-term revenue dynamics. At the same time, we are encouraged by what our team delivered beneath the surface, meaningful improvements in operating quality, a stronger cash flow profile and a materially healthier balance sheet. In 2025, our gross margin improved to 42.6%, up from 30.8% in 2024. We generated $96.8 million in net cash from operating activities and ended with 211.9 million in cash on hand. These results reflect our commitment to high-quality earnings, more sustainable cash flows and stronger returns on invested capital. Over the past 18 months, one of my key priorities as CEO together with the management team has been to view and reassess Kandi's business boundaries growth trajectory and long-term overall direction, amid the opportunities presented by technological innovation and industrial upgrading we are placing even greater emphasis on focused execution, disciplined capital allocation and the consistent delivery of major milestones. Beginning in 2026, Kandi is entering new phase of growth. Our strategy will be anchored around 2 core engines. Our first engine is the off-road electric vehicle business, centers on the North American market and golf carts, electric off-road products and others. This business represents Kandi's core franchise, underpinning stable cash flows and a well-established go-to-market distribution network. In the first quarter this year, the overall core business remained stable with continued progress in distribution channel expansion. Our dealer network continues to scale with a notable improvement in per dealer sales performance, further broadening our market coverage and brand presence in key markets and laying a solid foundation for full year growth. In addition, as we enter 2026, we are actively advancing our North American UTV business across 4 dimensions: next-generation model development, enhanced product experience, improved channel efficiency and strengthened supply chain capabilities. We have set internal sales targets, meaningfully above historical levels and have engaged an external automotive design team with proven mass production experience to help design our next-generation UTV products. Our ambition goes beyond simply selling more units. We are focused on boosting Kandi's product, competitiveness across the North American outdoor recreation and low-carbon mobility market. In December 2025, we signed an agreement to acquire, a premium U.S.-based electric off-road vehicle motorcycle brand with role now part of the Kandi family. Our goal is to establish premier electric off-road motorcycles as a meaningful new growth category within our North American product portfolio by 2026. We see strong synergies between and Kandi's existing North American distribution network, supply chain and product lineup. As we advance the integration. Our primary priorities will be brand alignment, channel coordination, supply chain optimization and product development aiming to ensure this acquisition translates into meaningful, measurable revenue contribution rather than a transaction of paper. Our second engine comprises emerging battery swapping equipment and intelligent robotics business. Battery swapping equipment represents our most important breakthrough opportunity in 2026. In August 2025, our subsidiary, China Battery Exchange was qualified as a battery swap equipment supplier within CATL supply chain, securing its first order for heavy truck battery swap stations equipment. In January 2026, China Battery Exchange entered into a 3-year strategic cooperation agreement with CATL subsidiary covering the mass production and delivery of heavy truck battery swap station equipment. Based on our current order visibility and a production schedule, we are confident in achieving meaningful revenue growth in 2026. The battery swap equipment business represents more than an incremental revenue stream for Kandi. It demonstrates a remarkable extension of our footprint from low-carbon mobility products into the broader new energy infrastructure sector. Looking ahead, our priorities are centered on execution on heavy truck battery swap station order deliveries, ramping up our mass delivery capacity and capturing emerging commercial opportunities across ports, mining operations and long-haul freight applications. On the intelligence robotics business front, our focus is on the deployment of autonomous quadruped robots in security, patrol and logistics part environment. We have entered a strategic partnership agreement with Hawk Robo Systems LLC to form a joint venture, KH robotics through which we are developing localized testing, validation and commercial operation capabilities in North America. We expect to complete the first functional demo by approximately June 2026, followed by field testing and initial pilot deployments in the second half of the year. This business remains at an early stage of deployment rather than providing near-term revenue guidance, we will evaluate and communicate progress through clearly defined product milestones and real-world use case validation. Regarding supply chain capabilities, we will continue to build out our global footprint, anchored by core R&D and manufacturing in Mainland China with flexible capacity in Taiwan and local assembly and front-end distribution network in the United States. The architecture provides meaningful structural insulation against geopolitical uncertainty and trade volatility while also enabling us to respond more quickly and effectively to evolving demand in the North American market. In sum, looking ahead to 2026. We are focused on 4 clear priorities. First, restoring sales momentum and advancing product upgrade across our UTV and low-carbon mobility lineup in the North America. Second, successfully integrating rule and translating the acquisition into tangible revenue contribution. Third, advancing the battery swaps equipment business from initial order delivery to large-scale deliveries. And fourth, advancing our intelligent robotics business through the completion of functional demo followed by field testing and initial pilot deployment. At the same time, we will maintain a disciplined approach to capital allocation. Our cash positions are not a justification for indiscriminate expansion, but rather it means to preserve flexibility in an uncertain environment. Any future investments in new business initiatives, acquisitions or capacity expansion must be guided by long-term shareholder returns and will be rigorously evaluated against clear benchmarks, including commercial progress, cash payback cycles and risk-adjusted returns. Today, Kandi has a clear platform structure, a focused dual engine strategy, a resilient global supply chain and a solid cash position. I firmly believe that with this core competencies and strategic positioning in place. We are well equipped to translate our vision of manufacturing joy driving the future into tangible long-term value for shareholders. Now let me turn the call over to our CFO, Alan Lim who will provide details on our full year 2025 financial performance. Thank you.

Thank you, Mr. Chen and thank you, everyone, for joining us today. I will go through our financial results for 2025. The net revenues were $87.4 million, a decrease of 31.5% from $127.6 million for 2024, primarily due to reduced demand for EV products in the POC market and fewer sales of crossover golf carts and other vehicle models. Ongoing trade uncertainties, including the potential tariffs and trade restrictions, together with persistent inflation and elevated interest rates, adversely affected consumer demand for higher price migration of vehicles, which in turn impacted sales to the Kandi's major retail customers and distributors. The cost of goods sold was $50.1 million, a decrease of 43.2% from $88.6 million for 2024. The decrease was primarily due to the corresponding decrease in sales. The gross profit was $37.3 million compared with $39.3 million for 2024. Gross margin was 42.6%, up from 30.8% for 2024. The improvement in gross margin was primarily driven by increased sales of the previously impacted inventory. The total operating expenses were $91.5 million, a decrease of 12.6% from $108.1 million for 2024. The factors, including the research and development expenses were 7.6 million, up 52.6% from $5.8 million for 2024, mainly due to the completion of research and development projects during the current period. Secondly, the selling and market expenses were $16.7 million, a decrease of 21.5% from $21.2 million for 2024. The decrease was mainly due to the decreases in trade expenses and commission expenses, in line with the decrease in revenue. The general administrative expenses were for $54.4 million, a decrease of 5.7% from $ 57.7 million for 2024. The decrease was mainly due to the decreased depreciation and amortization in the current period following the material impairment of assets provisioned in 2024. The loss from operations was $57.2 million compared with $68.8 million for 2024. The net loss for the current year was $95.6 million compared with $31.8 million for 2024. The decrease in net loss was primarily attributed to the higher expenses resulting from the anti-dumping building expenses and increased litigation costs, compared to the prior year. The basic and diluted net loss attributable to the company's shareholders per share were $1.12 compared with basic and diluted net loss per share of $0.59 for 2024. Turning to our balance sheet. Our financial position remains healthy and stable. As of December 31, 2025, the company had cash and cash equivalents, the resi cash and sophisticated deposit totaling $211.9 million compared with $136.3 million as of December 31, 2024. That concludes all of my 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 Kandi Technologies. .

This concludes today's conference call. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]