Speaker 1
Hello, everyone, and welcome to Kandi Technologies 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 our press release earlier today and are available online. You can access the earnings press release and subscribe 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 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 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 our English translation. Mr. Chen, please go ahead.
Good day, investors and analysts. Welcome to Kandi Technologies Earnings Conference Call for the first half of 2025. We appreciate your time as we review the company's performance. The global economic landscape continues to face significant uncertainty, which has created challenges for our business. However, due to our agility and strategic planning, we've made considerable progress in several key initiatives while also enhancing our traditional off-road vehicle operations. We've capitalized on our core strengths to enter the emerging fields of embodied intelligence and new energy infrastructure. Through the establishment of several important partnerships, we are gradually transforming from a traditional manufacturing company into a holding platform focused on intelligent equipment manufacturing. This transformation not only showcases our resilience in a challenging environment but also reinforces our confidence in achieving sustainable growth in the long term. I will now provide an update on the latest developments in our core business. After adjustments and upgrades in the first half of the year, we have entered a new phase of refined operations aimed at delivering steady high-quality growth. By optimizing resource allocation, managing inventory more effectively, and maintaining disciplined cost control, we are steadily improving profitability and enhancing our cash flow management. Let's examine these business operations through three key aspects. In product sales, our emphasis on inventory management within retail channels has driven a significant improvement in gross margin to 45.2% for the first half of 2025, an increase of 13.5 percentage points from 31.7% in the same period of 2024. This improvement reflects the success of our refined operations and cost control initiatives. By optimizing our production structure and streamlining assembly line processes, we've enhanced manufacturing efficiency and reduced delivery times, further improving product reliability. Regarding sales channels, we are working on a more balanced and strategic distribution layout to bolster both market penetration and service capabilities. We have strengthened key partnerships with major retailers, including Lowe's, and expanded our dealer network. Our products can now be found in 1,050 retail outlets, with our dealer network experiencing steady growth. Thanks to the efforts of our new sales team, the dealer to retail sales ratio has improved from 129 to 228 as of the end of June, demonstrating a more diversified and resilient channel structure. In addition to our traditional sales channels, we are exploring high-margin direct-to-consumer avenues, e-commerce platforms, and major distributor networks while assessing and optimizing the long-term profitability of our key account partnerships. Our goal is to strike an optimal balance between brand visibility, market share, and profitability. Finally, we are actively speeding up the design and development of several new products. The design schematics are finalized, and we expect to launch these products by mid-next year. Their launch will inject new growth momentum, expand our product range, and enhance our competitive position in the market. Moving on to our emerging business segments, driven by strong market insights, we maintain an innovation-focused approach. Specifically, in intelligent equipment and new energy infrastructure, let me outline our latest initiatives in these two areas. In the first half of this year, we began a deep collaboration with Deep Robotics, a leading Chinese innovator in embodied intelligence, to co-develop intelligent golf equipment and quadruped robots for security inspections, utilizing our independently developed cloud edge terminal intelligence computing system. These innovative small devices are tailored to meet diverse market needs and reveal significant growth opportunities for our intelligent equipment business. In the new energy infrastructure arena, battery swapping technology is a key strategic cornerstone for us. Kandi has been promoting the adoption and application of this technology for over ten years, establishing itself as an industry leader. Through our subsidiary, China Battery Exchange, Zhejiang Technology Co., Ltd., we have become a supplier of heavy truck battery swapping station equipment to CATL, a global leader in power batteries, and successfully secured our first order to help implement its ambitious plan for 10,000 stations. This collaboration strengthens our technological leadership and positions us for substantial revenue generation. Before I finish, let’s briefly review 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 strong, providing sufficient liquidity to support our strategic growth initiatives and ongoing business expansions. In summary, Kandi has shown resilience and a strong ability for sustained growth in the face of external challenges and internal transformations during the first half of 2025. Despite some short-term volatility, we believe our disciplined approach to optimized operations, strategic partnerships, and technological innovation has positioned the company well for long-term development. Looking to the future, we are confident in our dual engine strategy, balancing stable cash flow businesses with growth incubation initiatives. Through disciplined execution and ongoing innovation, we will bolster 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 I will turn the call over to our CFO, Alan Lim, who will detail our financial performance. Thank you.
Thank you, Mr. Chen and Kewa. Thank you, 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 a 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 2025. The decrease was mainly due to 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 sheet. Our financial position remains strong. As of June 30, 2025, the company had cash and cash equivalents, restricted cash, and certificates of deposits 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 Kewa for any final comments. Thank you.
