Good morning, everyone, and welcome to China Automotive Systems' First Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode, and we will be opening the floor for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Kevin Theiss, Investor Relations. Kevin, the floor is yours. Thank you, everyone, for joining us today. Welcome to China Automotive Systems' 2025 First Quarter Conference Call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation. Before we begin, I will remind all listeners that throughout this call we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading risk factors and the results of operations in the company's Form 10-K annual report for the year ended December 31, 2024, as filed with the Securities and Exchange Commission, and in other documents filed by the company from time to time with the Securities and Exchange Commission. Any of these factors and other factors beyond our control could have an adverse effect when the overall business environment causes uncertainties in the regions where we conduct business, causes our business to suffer in ways we cannot predict, and materially and adversely impact our business, financial condition, and results of operations. A prolonged disruption or any unforeseen delay in our operations of the manufacturing, delivery, and assembly processes within any of our production facilities could result in delays in the shipments of products to our customers, increased costs, and reduced revenue. The company expressly disdains any duty to provide updates to any forward-looking statements made in this call, whether as a result of new information, future events, or otherwise. On this call, I will provide a brief overview and summary of the First Quarter 2025 results for the period ended March 31, 2025. Management will then conduct a Q&A session. The 2025 First Quarter results are unaudited and are reported using U.S. GAAP accounting. For the purposes of today's call, I'll review the financial results in U.S. dollars. We will begin with a review of some of the quarterly business highlights, recent dynamics of the Chinese economy, and automobile industry and our market position. Following our record net sales of $650.9 million for the 2024 year, our net sales increased by 19.9% to $167.1 million in the first quarter of 2025, compared to $139.4 million in the first quarter of 2024. All operations reported sales growth with the exception of North America in the first quarter of 2025. Total net sales of electric power steering systems, EPS, increased by 54% year over year as our sales transitioned to higher technology products. Our Henglong KYB subsidiary achieved 38.2% year-over-year sales growth of its EPS products in the first quarter of 2025. Our largest steering subsidiary, Henglong, which produces traditional hydraulic steering systems for the Chinese passenger vehicle market, reported the sales climbed 37.5% year-over-year over year in the first quarter of 2025. Sales of traditional steering products to Chery Auto increased by 13.5% year over year, and sales by Jiulong's commercial vehicle steering products rallied to 17.4% year -over -year growth in the first quarter of 2025. While North American sales declined by 10.3% year over year to $27.2 million due primarily to lower sales to Stellantis, our sales to the Brazilian Market increased by 30.2% year -over -year due to higher demand by Stellantis. In the macro economy, Chinese GDP growth was 5.4% year over year in the first quarter of 2025, consistent with the fourth quarter of 2024. The Chinese economy has stabilized but is still facing challenges. According to statistics from the China Association of Automobile Manufacturers (CAAM), the combined unit sales of passenger commercial vehicles increased by 11.2% year -over -year to 7.5 million units for the first quarter of 2025. Passenger car unit sales grew 12.9% year -over -year to 6.4 million units, and China's passenger vehicle brand sales totaled 4.4 million units and represented 68.1% of total passenger vehicle market sales in the first quarter of 2025. New energy vehicle unit sales grew by 47.1% year -over -year to 3.1 million units, as new energy vehicles were 41.2% of the total car sales in China in the first quarter of 2025. For the first quarter of 2025, Chinese commercial vehicle sales increased by 1.8% year -over -year to 1.05 million units, and exports of automotive vehicle units increased by 7.3% year-over-yea r to 1.4 million units. Tax incentives, subsidies for scrapping older vehicles, and lower interest financing are among the government incentives to support the purchases of automobiles in China for 2025. Additionally, local government and private incentives may also aid buyers. Gross profit increased by 18.8% year -over -year to $28.6 million, compared to $24.1 million in 2024. Gross margin was 17.1% compared to 17.3% in the first quarter last year, up from 15.6% in the fourth quarter of 2024. R&D expenses increased by 64% to $8.7 million from $5.3 million in the first quarter of 2024. The increase in investment was partially due to continuous development of our Hydraulic and EPS products, especially our EPS product, which recently started mass production. Also, the increase reflected the purchase of new molds for a new product beginning in the first quarter of 2025, as well as a project with Stellantis. A 41.3% increase in operating expenses, including R&D, resulted in a 10.5% year-over-year reduction in income from operations. Net income attributable to the parent company shareholders for diluted shares was $0.24 versus $0.27 in the year-ago first quarter. Net cash provided by operating activities rose 73.1% year-over-year to $18.1 million for the first quarter of 2025. Total cash and cash equivalents, pledged cash, and short-term investments were $135.9 million, or approximately $4.50 per diluted share at March 31, 2025. Our EPS steering product developed for Nanjing Iveco has entered mass production in the first quarter of 2025. This product features an electric motor with a unit control and a ball nut and bell drive reduction system to provide steering assist. Our EPS architecture is capable of performing autonomous driving functions such as automatic parking, lane keep assist, and lane follow assist. Our Shashi Jiulong Power Steering Gears Company subsidiary won customer awards and accolades from two major vehicle OEM customers, Proton Motors and Shaanxi Automobile Heavy Truck. Shashi Jiulong provides steering assistance to various commercial vehicles in China. Shashi Jiulong received dual honors, the Excellent Supplier Series Award and the Excellent Supplier Series Award from the All-Man Business Unit of Proton Motors for exemplary product development cooperation, supply guarantees, and quality reliability. In addition, Shashi Jiulong won the Strategic Synergy Award, the highest award given by Shaanxi for future research development and supply chain cooperation. We remain well-positioned with our advanced steering technologies and diverse product portfolio to address market opportunities in China and overseas. Now, let me review the financial results in the first quarter of 2025. Our net sales increased by 19.9% to $167.1 million in the first quarter of 2025, compared to $139.4 million in the first quarter of 2024. Net sales of traditional steering products and parts increased by 2.3% to $94.1 million, compared to $92 million for the first quarter of 2024. Net sales of electric power steering EPS products and parts grew by 54% to $73 million for the three months ended March 31, 2025, compared with $47.4 million for the same period in 2024. EPS products for the first quarter of 2025 were approximately 43.7% of total sales, compared with 34% of total net sales in the first quarter of 2024. QB Henglong's export sales were $27.2 million, compared to $30.1 million in the first quarter of 2024, primarily due to lower demand for passenger vehicle products like Stellantis and Li. Shashi Jiulong's sales increased by 17.4% to $19.7 million from $16.8 million in the 2024 first quarter. Brazil Henglong's net product sales increased by 30.2% to $16.5 million in the first quarter of 2025, compared to $12.7 million for the same period in 2024 due to higher demand from Stellantis and Li in that market. Wuhu sales, which mainly provides steering assistance to Chery Automobile in China, increased by 13.5% year -over -year, and sales for other entities increased by 19.1% year over year to $34.6 million. Gross profit increased by 18.8% to $28.6 million from $24.1 million in the first quarter of 2024. Gross margin in the first quarter of 2025 was 17.1%, which was consistent with 17.3% in the first quarter of 2024. Selling expenses increased by 18.3% to $4.8 million from $4.1 million in the first quarter of 2024. This increase in selling expenses was primarily due to higher warehouse and logistical expenses due to higher revenues. Selling expenses represented 2.9% of net sales in the first quarter of 2025 and the first quarter of 2024. General administrative expenses, G&A, increased by 36.4% to $7.6 million, compared with $5.5 million in the first quarter of 2024, mainly due to staff-related expenses, including a one-time severance cost of approximately $1.4 million at one subsidiary. G&A expenses represented 4.5% of net sales in the first quarter of 2025, compared with 4% of net sales in the first quarter of 2024. Research and development expenses, R&D, increased by 64% to $8.7 million, compared to $5.3 million in the first quarter of 2024, mainly due to higher R&D activities for new projects and products. R&D expenses represented 5.2% of net sales in the first quarter of 2025, compared to 3.8% in the first quarter of 2024. Other income was $1.9 million for the first quarter of 2025, compared to $2.4 million for the first quarter of 2024. Income from operations declined by 10.5% to $8.6 million in the first quarter of 2025, compared to income from operations of $9.7 million in the first quarter of 2024. The decrease in 2025 first quarter income from operations was primarily due to a 41.3% increase in operating expenses. Interest expense was $0.5 million in the first quarter of 2025, compared to $0.3 million in the first quarter of 2024. Financial income net was $2 million in the first quarter of 2025, compared to financial expense net of $0.01 million in the first quarter of 2024. This change was primarily due to an increase in foreign exchange gains due to foreign exchange volatility. Income before income tax expenses and equity in earnings of affiliated companies was $12.1 million in the first quarter of 2025, compared to $11.8 million in the first quarter of 2024. Equity in losses of affiliated companies was $0.7 million in the first quarter of 2025, compared with equity in losses of affiliated companies of $0.8 million in the first quarter of 2024. Income tax expense was $2.9 million for the first quarter of 2025, as compared to $1.7 million for the first quarter of 2024. This higher tax was primarily due to a higher income before income tax expenses, as compared to the same period last year, and a higher expected annual effective tax rate in 2025 based on the latest annual forecast, as compared to 2024. Net income attributable to parent company common shareholders was $7.1 million in the first quarter of 2025, compared to $8.3 million in the first quarter of 2024. Diluted income per share was $0.24 in the first quarter of 2025, compared to net income for diluted share of $0.27 in the first quarter of 2024. The weighted average number of diluted common shares outstanding was $30,170,172 in the first quarter of 2025, compared to $30,185,702 in the first quarter of 2024. Now, let's provide some balance sheet and other financial highlights. As of March 31, 2025, total cash, cash equivalent, and short-term investments were $89.9 million. Total accounts receivable, including notes receivable, was $323.6 million. Accounts payable, including notes payable, were $282.6 million, and short-term bank loans were $66.7 million. Our current ratio was 1.4 to 1, and working capital raised to $154.7 million as of March 31, 2025, compared to $146.2 million as of December 31, 2024. Total parent company stockholders' equity was $357.5 million as of March 31, 2025, compared to $349.6 million as of December 31, 2024. Net cash flow from operating activities was $18.1 million in the first quarter of 2025, compared with $10.5 million in the first quarter of 2024. Cash paid to acquire property, equipment, and land use rights was $10.3 million in the first quarter of 2025. Business Outlook: Management has reiterated revenue guidance for the full fiscal year 2025 of $700 million. This target is based on companies' current views on operating the market conditions, which are subject to change. With that operator, we are ready to begin the Q&A session. Thank you very much. At this time, we will be conducting our Q&A session. If you would like to ask a question, please press Star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press Star two if you would like to remove your question from the queue. For instance, using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Your first question is coming from Jonathan Mires, who's a private investor. Jonathan, your line is live. Good morning, everybody. We're well. My question is, why did research development increase by 64% in the 2025 first quarter? Will R&D remain at this high level for the 2025 year, or will it vary? 这是我们一个投资人的问题。 他说我们第一季度的科研费用上升了，比去年同期同比上了64%。 他说为什么上了这么多。 然后第二个问题就是说，我们全年来看，科研费用是不是会维持在这么一个高位，还是会有一些变化？ 2025年全年。 从今年一季度开始，公司加大了REPS这一块的研发投入。我们增加了研发人员，同时的话也增加了一些研发的模具。所以说整个一季度的话，整个R&D这块费用增加比较多。我们全年的预算差不多是在$34 million这样一个水平，然后约占销售收入的5%。这个也是为了满足国内高新技术企业的R&D需要占销售收入5%这样一个要求。所以说全年的预算预计在收入的5%这样一个水平。 In the first quarter, we did increase our R&D effort, and hence the R&D expenses also went up, mainly in the area of research and development of REPS product. For this product, we have increased the staffing to help us to further advance new technologies. We also increased some of the equipment design modules, so all that contributed to higher R&D expenses in Q1. On a four-year basis, looking forward, we're seeing about 5% of total revenue, give or take around $34 million on R&D. This also, please be mindful, we are maintaining 5% of revenue in R&D. That will help us to qualify high-tech status in China, and then we will also, in turn, receive tax benefit. Okay. Are you finished with your question, Jonathan? Yes. Thank you very much. Thank you. Thank you very much. Our next question is coming from Garry Nash from Nash Consulting. Gary, your line is live. Thank you. First, good day to everyone. Two-part question. Could you please comment on the almost $10 million increase in inventories in the first quarter of 2025? Could you also comment on what is the outlook for inventory levels in the rest of 2025? Okay. Thank you. To simulate a question and the one PR, 他说第一季度我们的存货增加了$10 million。能不能解释一下什么情况，是不是跟贸易现在的争端有关系，还是其他原因？然后再讲一下全年，2025年全年存货的会是什么一个状况？ the whole year, it will remain at this level. Okay. Gary, to answer your question, the inventory increase, it's actually partly related to the trade war and as the U.S. administration has been putting a lot of pressure on the tariffs. In response to the potential pressure, we have made some advanced shipment to the U.S. months ahead, so our customer will not experience any disruption in the productions for that consideration. Our inventory in the U.S. has given us up to September in case any kind of volatilities policy-wise. This is sort of out of ordinary practice, but we have to do something to address such potential risk. That's why our inventory increased. In terms of percentage, inventory increased about 10%. The overall revenue, we have increased 19.9%. It's not a completely outsized increase. On a four-year basis, we believe we will maintain a healthy level. We will not have an oversized inventory. Okay. Does that answer your question, Gary? Yes, it does. Thank you very much. Thank you. Thank you. Thank you Thank you very much. Just a reminder, if there are any remaining questions, you can still join the queue by pressing Star 1 on your phone keypad now. Our next question is coming from Michael Fiedler, a private investor. Michael, your line is live. Good morning. My question is, the gross margin was 17.1% for the first quarter of 2025. What is the outlook for the gross margin for the rest of 2025? Great. Thank you. 这个问题是投资人的问题是关于毛利。毛利第一季度是17.1%。全年预测我们觉得毛利会在什么一个水平？ 今年的第一季度的毛利率17.1%跟去年全年的17%差不多是一个持平的状态，跟去年的一季度差不多也相当的一个水平。跟前些年比稍微降了一点点，但是这个也是我们主动的降低一些毛利率，然后去争取更多的一些市场份额。从最近几个季度的效果来看，还是比较显著的。我们的收入这一块增长还是比较显著。简单一句话，就是全年的话，我们会跟去年比略有改善，然后差不多与Q1保持一个持平的状态。 Okay. Yes. Q1, our margin at slightly higher than 17%. The Q1 gross margin is very similar to comparable corresponding quarter in 2024, as well as a four-year average gross margin. We are fully aware this level of gross margin is typically lower than our typical margin in the past, prior to 2024. This is part of our strategy to proactively seek more market share by using some of the pricing strategy. Clearly, this has borne fruit. This strategy has borne fruit. We are growing revenue, gaining market share. On a four-year basis, 2025 four-year basis, we believe we will maintain at similar gross margin level and with a slight improvement. Thank you. Thank you. Thank you. Do you have any? Michael. Okay. That answers my question. Thank you. Okay. We appear to have no further questions in the queue, but if you would like to ask a question, you can still do so by pressing star one on your phone keypad now. Wait a moment in case anyone else pops into the queue. Okay. I'll hand back over to Kevin then for further comments. Okay. We have some additional questions that were emailed to us. I'll go ahead and announce those. The first one is, what is the impact of the U.S. proposed tariffs on your new order flow? Is it impacting any areas beyond North America? Okay. Maybe we should consider the one you should. 电邮过来的。第一个问题是关税，美国的关税对我们的新的订单有什么样的影响？然后还有就是在北美以外的市场会有什么影响？由于整个美国的关税是不是会引发其他市场的一些变化？ way, we will have more options to deal with tariffs. That is all. Okay. In terms of tariffs, we mentioned earlier in the beginning of the year, we anticipated there will be some pressure coming from the administration. We made a decision to make some advanced shipment to our U.S. facility. Those inventory help us to carry us to foreseeable challenges in the coming quarters, which turned out to be very useful. Also, as of yesterday, China and the U.S. announced the truce on the tariff, which is a very positive development. We have immediately got in touch with our customer in North America. We come to a very good conversation and decision. They all agreed to bear the increased part of the cost related with tariffs. To answer your question, overall, the tariff has very minimal impact to our business and the order flow. The new order will continue to develop products towards our customers. Outside the U.S., we still see opportunities. As we reported today, we have a pretty healthy, strong growth in Brazil. We are also making some strategic planning on global expansion. That will also, at some point, when we announce, help us to further weather different kinds of volatilities in the marketplace. Okay. Thank you. I have another question that was emailed in. Please provide an update on the manufacturing of the REPS steering product for Nanjing Iveco. Have other automotive OEMs also ordered the REPS product? OEM 也在订购我们的 REPS 系统？ 好的。南京EVCO这一块的话，目前已经开始了批量生产。除此以外的话，我们现在也开始给吉利集团提供批量供货。正在开发过程中的客户还有广汽、宇通、青岛。这些客户的话都已经完成了样件开发，也是计划在今年会实现批量生产。随着REPS这一块的需求量的大增，我们今年的话也进行了新的产线的扩张，修建了新的厂房。目前整个REPS的生产的话已经开始在新的厂房里顺利进行了。就这些。 Yeah. Yes. REPS is a growth area. We have already begun the mass production and shipment to our customer, Nanjing Iveco. In addition to Iveco, the other OEM also placing orders on our new products. They are including Chery Automobile, Guangzhou Automobile Group, Guangxi Auto, then Yutong Bus, and Qingdao Auto. For this new REPS product, we have also built a brand new facility dedicated to the production and installed new production lines. We are pretty excited about this new opportunity presented to us. Okay. Thank you. The last question is, can you provide an update on the Sentient operation as far as the automatic driving systems? Yeah. So the only one is to say, what is that Sentience AB, 这个列强公司有没有一些新的进展关于无人驾驶？ 好的。目前在手的订单是沃尔沃卡车的，主要是EPS这一块。目前的月产量已经达到了3,500台，全年预计在4万台。预计收入的话可能会在3,000万欧元这样一个水平。这个是在手的已经是持续增长的，从去年就已经开始爬坡到月产3,000多台，到现在的话是月产3,500台。另外一款的话是国内的BYD的宋车型，然后目前的话也开发得差不多了，年内的话应该可以投入批量生产。这是第二。第三个正在接触开发过程中的是沃尔沃的乘用车和雷诺的乘用车。这两款的话都是线控转向项目，这个是我们最新的一些技术。好吧，就这些。 Okay. 这个2025年的沃尔沃卡车这边的销售大概是多少？ 年销售3,000万欧元。 Okay. Yes. We have quite a bit of development on Sentient AB, our subsidiary for developing autonomous driving technologies. Our Sentient main customer now is Volvo Trucks for the EPS product. We are shipping 3,500 units. This month, on a full-year basis, we are targeting 40,000 units for 2025. On the revenue side, for this particular customer, we're booking EUR 30 million for 2025. Other than this particular customer, we have one contract with BYD, their new model, model Tang. We are expecting mass production for this particular model, autonomous driving technology for 2025. The mass production will start in 2025. We have entered into Volvo passenger vehicle with our fly-by-wire technology. There is another automaker with Renault. We are making very good progress with all different customers on both passenger and commercial side. We are expecting a very meaningful contribution from our subsidiary Sentience. Thank you. Just before we wrap up the call, I'm going to check to see if there are any further questions from the audience. If you want to press star one to join the queue. Okay. We have no one else in the queue at the moment. I'll now hand back over to Kevin for any closing remarks. We want to thank everyone for your participation in today's conference call. Please be safe, and we look forward to speaking with you in the future. Thank you. Thank you. Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.