Welcome to the China Automotive Systems' second quarter 2025 conference call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to your host, Kevin Theiss, and Vesta Relations. You may begin. Thank you, everyone, for joining us today. Welcome to China Automotive Systems' 2025 second quarter conference call. Joining us today is 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 Chen Weizen. 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 the forward-looking statements due to a number of factors, including those described under the heading Risk Factors, 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 any other document 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 on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict, and materially and adversely impact our business, financial condition, and the 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 shipment of products to our customers, increase costs, and reduce revenue. The company expressly disclaims any obligation to update 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 second quarter 2025 results for the period ended June 30, 2025. Management will then conduct a question and answer session. The 2025 second quarter results are unaudited and are reported using U.S. GAAP accounting. For the purposes of our call today, I'll review the financial results in U.S. dollars. We will begin with a review of some of the quarterly business highlights, the recent dynamics of the Chinese economy and automobile industry, and our market position. Our sales increased by 11.1% year-over-year to $176.2 million in the second quarter of 2025, compared to $158.6 million in the second quarter of 2024, and increased compared with $167.1 million in the first quarter of 2025. Total sales of electric power steering systems, EPS, increased by 31.1% year-over-year to $72.9 million, as our sales mix continues to shift to higher technology products. Our Henglong KYB subsidiaries achieved 26% year-over-year growth of its EPS products in the second quarter of 2025. Total EPS products were 41.2% of total sales for the three months ended June 30, 2025, versus 35.1% for the same quarter in 2024. Our steering subsidiary, Henglong, which produces traditional hydraulic steering systems for the Chinese passenger vehicle market, reported a 4.2% year-over-year sales increase to $83.4 million in the second quarter of 2025. Sales by Zhulong's commercial vehicle steering products increased by 25.6% year-over-year in the second quarter of 2025. Tax incentives, subsidies for scrappy motor vehicles, and lower interest rate financing are among the government incentives to support the purchases of automobile vehicles in China for 2025. Additionally, local and private incentives may also aid buyers. North American sales increased by 14.9% year-over-year to $30.8 million, primarily due to higher sales to Stellantis. Our Brazilian sales increased by 49.4% year-over-year, mainly due to higher demand by Stellantis also. Brazilian sales represented 10.1% of total sales in the second quarter of 2025. Combined North and South American sales have risen to approximately 27.5% of total sales in the 2025 second quarter. For the macroeconomy, Chinese GDP was 5.2% year-over-year in the second quarter of 2025, a slight decrease from the 5.4% in the first quarter of 2025. For passenger vehicle and commercial vehicle markets in China, our largest markets, their status can have direct impacts on our sales. According to statistics from the China Association of Automobile Manufacturers, CAAM, total vehicle unit sales increased by 11.4% year-over-year in the first half of 2025. Passenger vehicle unit sales grew by 13% year-over-year, and commercial vehicle sales increased by 2.6% year-over-year in the first six months of 2025. Gross profit increased by 4.2% in the second quarter of 2025. Operating expenses were well controlled and declined by $2.2 million in the second quarter of 2025, compared with the 2024 second quarter. R&D expenses were stable at $8.1 million in the second quarter of 2025. We continued the development of our hydraulic and ETS products, especially our R-ETS product line. Income from operations grew by 20.2% to $13 million. Income tax expense was $4 million for the second quarter of 2025, as compared to $2.1 million for the 2024 second quarter. The increase in income taxes is due to higher income before income tax expenses of $15.1 million and expected higher annual effective tax rate in 2025 based on the latest annual forecast as compared to 2024. Net income to CAAS parent common shareholders for diluted shares was $0.25 versus $0.24 in the year-ago second quarter. Net cash provided by operating activities rose by almost $40 million year-over-year to $49.1 million for the first six months of 2025. Total cash, tax credits, pre-tax and short-term reductions were $135.3 million, or approximately $4.48 per share at June 30, 2025. Our second generation IRCB, that's Intelligent Electrohydraulic Circulating Ball Power Steering, for use in heavy-duty vehicles that use both hydraulic power and electrical controls, is now in mass production in China. Following the IRCB's outstanding performance and cost efficiency, new orders in July by customers set a new record in the power steering industry for the ramp-up to mass production. As China's first IRCB compatible system with the L2 Plus Assisted Driving, this system utilizes cutting-edge electrohydraulic control technology to achieve internationally benchmarked steering accuracy and response speed. By optimizing energy consumption, it is projected to reduce operational costs by nearly RMB 36,000 per vehicle annually. In our first six months of 2025, our R-ETS system steering product developed for Nanjing Iveco also entered mass production. It is capable of performing autonomous driving functions such as automatic parking, lane keep assist, lane follow assist. Also, in the first six months of 2025, our Zhulong Power Steering Gears Company, Zhulong subsidiary, won customer awards and accolades from two major commercial vehicle OEMs, Beiqi Foton Motor Corp. and Shanxi Automobile Heavy Truck. Given our growing international sales, the Board of Directors and management has decided to begin the process to change our corporate registrations from the state of Delaware to the Cayman Islands. We believe this change will pay significant costs, require less regulatory reporting, and allow management to concentrate on improving operations, sales, and penetrating our growing international markets. The success of our R&D technology project has provided state-of-the-art steering products. Our large diverse product portfolio provides solutions for the largest vehicle global OEM to provide the means to access more international markets to enhance our growth. Now, let me go over the financial results in the second quarter of 2025. Net sales increased by 11.1% year-over-year to $176.2 million compared to $158.6 million in the second quarter of 2024. Net sales of traditional steering products and parts increased slightly year-over-year to $103.3 million in the second quarter of 2025. Net sales of ETS products rose 31.1% year-over-year to $72.9 million from $55.6 million for the same period in 2024. ETS product sales grew to 41.4% of the total net sales for the second quarter of 2025, compared to 35.1% for the same period in 2024. Our subsidiary Zhulong's sales of commercial vehicle steering systems rose by 25.6% to $23.5 million, compared with $18.7 million for the second quarter of 2024. Sales to North American customers increased by 11.8% to $30 million, compared to $26.8 million in the second quarter of 2024. North American sales increased primarily due to improved demand by one customer. Sales in Brazil were 49.4% higher in the second quarter of 2025 to $17.9 million from $12 million in the second quarter of 2024. Gross profit grew by 4.2% year-over-year to $30.5 million from $29.3 million in the second quarter of 2024. Gross profit margin decreased to 17.3% in the second quarter of 2025 from 18.5% in the second quarter of 2024. The decrease in gross profit margin was mainly due to an increase in tariffs and a product mix change from increased sales portion of relatively lower margin products. Gain on other sales was $0.5 million in the second quarter of 2025 compared to $1.7 million in the second quarter of 2024. Selling expenses at $4.5 million in the second quarter of 2025 were consistent with the second quarter of 2024. Selling expenses represented 2.6% of net sales in the second quarter of 2025 compared to 2.9% in the second quarter of 2024. General and administrative expenses, G&A, decreased to $5.4 million compared to $7.4 million in the second quarter of 2024, primarily due to decreased business taxes and surcharges. G&A expenses represented 3.1% of net sales in the second quarter of 2025 compared to 4.7% of net sales in the second quarter of 2024. Research and development expenses, R&D, were stable at $8.1 million in the second quarter of each year. R&D expenses represented 4.6% of net sales in the second quarter of 2025 compared to 5.2% in the second quarter of 2024. Research and development programs include but are not limited to electric power and hydraulic steering systems, automotive intelligence and software technologies, automotive electronics, high polymer materials, and manufacturing technology. Other income was $1.1 million for the second quarter of 2025 compared to $1.7 million for the three months ended June 30, 2024. Income from operations rose by 20.2% to $13 million in the second quarter of 2025 from $10.8 million in the second quarter of 2024. The increase was primarily due to higher sales. Interest expense was $0.3 million in the second quarter of 2025 compared to $0.3 million in the second quarter of 2024. Net financial income was $1.3 million in the second quarter of 2025 compared to net financial expense of $0.7 million in the second quarter of 2024. The increase in net financial income was primarily due to an increase in the foreign exchange gain due to foreign exchange volatility. Income before income tax expenses and equity and earnings of affiliated companies was $15.1 million in the second quarter of 2025 compared to income before income tax expense and equity and earnings of affiliated companies of $11.7 million in the second quarter of 2024. The change in income before income tax expense and equity and earnings of affiliated companies was mainly due to higher income from operations in the second quarter of 2025 compared with last year's same quarter. Income tax expense was $4 million in the second quarter of 2025 compared to $2.1 million for the second quarter of 2024. The increase in income tax expense was primarily due to a higher income before income tax expenses and higher expected annual effective tax rate in 2025 based on the annual forecast as compared to 2024. Net income attributable to parent companies' common shareholders was $7.6 million in the second quarter of 2025 compared to net income attributable to parent companies' common shareholders of $7.1 million in the second quarter of 2024. Diluted earnings per share were $0.25 in the second quarter of 2025 compared to $0.24 in the second quarter of 2024. Weighted average number of diluted common shares outstanding was 30,170,702 in the second quarter of 2025 compared to 30,185,702 in the second quarter of 2024. Six months of 2025, net sales increased by 15.2% year-over-year to $343 million in the first six months of 2025 compared to $298 million in the first six months of 2024, primarily due to increased sales of ETS systems. Six months gross profit increased by 10.8% year-over-year to $59.1 million from $53.4 million in the corresponding period last year. Six months gross profit margin was 17.2% compared with 17.9% in the first six months of 2024. Gain on other sales was $1.6 million in the first six months of 2025 compared to $2.2 million in the corresponding period last year. Income from operations increased by 5.7% year-over-year to $21.6 million in the first six months of 2025 from $20.5 million in the first six months of 2024. Net income attributable to parent companies' common shareholders was $14.7 million in the first six months of 2025 compared to net income attributable to parent companies' common shareholders of $15.4 million in the corresponding period in 2024. Diluted earnings per share in the first six months of 2025 were $0.49 compared to diluted earnings per share of $0.51 in the first six months of 2024. Now, let's see prices. Cash and cash given to short-term investments were $135.3 million, or approximately $4.48 per share as of June 30, 2025. Networking capital was $170.9 million. Total accounts receivable, including notes receivable, were $294.2 million. Accounts payable, including notes payable, were $269.6 million, and short-term loans were $71.9 million. Total parent company stockholders' equity was $366.4 million as of June 30, 2024, compared to $349.6 million as of December 31, 2024. Additionally, net cash provided by operating activities of $49.1 million in the first six months of 2024. We invested $18.5 million in the capital expenditures in the first half of 2025 as we continue to invest in our R&D and production capabilities. The business outcome. Management has raised revenue guidance for the full fiscal year 2025 to $720 million. This target is based on the company's current views on operating and market conditions which are subject to change. With that, operator, we are ready to begin the Q&A. Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Your first question for today is from Jonathan Yies, an individual investor. My question is, why has the income tax rate increased in 2025? 我们的这个一个投资人的问题啊, 为什么我们这个, 是增加了在2025年的税收, 就是这样, 就是税收增加了, 是什么东西啊? 第一个呢, 就是这个税前利润的增长。第二块呢, 就是说我们的有效费率稍微提升了一些啊。在去年的时候呢, 我们有大概差不多$1.5 million, 一百五十万美金的一个税务调整。因此, 今年我们在这个研发费用的交际扣除上面的时候也更加保守了一些。我们去年采用的交际扣除的比例是100%, 今年呢, 就是用了40%, 所以比扣的少了, 所以说这个有效受力税率也提升了。综合这两个原因导致今年的这个税收增加了。 OK, the increase of the tax is due to two factors. One is the pre-tax profit or profit before tax that's gone up, as the overall revenue has increased. The other reason is the tax rate has slightly ticked up. Last year, there was a $1.5 million tax adjustment, which affected last year's tax provision. This year has a different effect, and that's overall affecting the total tax provision. Your next question for today is from Michael Sitter, an individual investor. Good morning. I have two questions. I have a question I have a question about R&D. It's in the 2025 second quarter, why was R&D flat at $8.1 million? What's the outlook for R&D spending? [Foreign language] [Foreign language] OK, so Q2, you're right, in the first quarter, in the second quarter, our revenue has increased to increase by 11%. R&D during the same quarter is relatively flat. The reason being, in the first quarter, we actually had R&D expenses that were a little bit overspent. It increased on the year-over-year basis during the first quarter, was increased by $3.4 million. That's about 64% year-over-year increase. That's part of the reason we didn't have to increase as much during the second quarter. On the first half perspective, first half, the R&D expenses are about $16.8 million versus last year's same period, $13.5 million. That R&D expense will continue to invest in the future technology, whether it's a value of technology or the different type of steering product going to electric vehicle. We're very committed to long-term investment into R&D. [Foreign language] Yeah, on a full-year basis, we're expecting $32 million to $35 million on the R&D expenses. That's about 5% of total revenue. 80% of R&D expenses is going to EV-related product, the steering product for the EV sector, including R-ETS and all different kind of products, and our customers are sending orders. Overall, R&D is on track. Okay. I have a follow-up question, which is, given a strong electric vehicle retainer, how much of the current R&D spending is for new energy technologies? I would say new energy technologies for. [Foreign language] [Foreign language] OK, so 80% of our R&D expenditures are going to the EV. As you know, in China right now, every two cars sold in the market, one of every two cars is an EV. The EV penetration is very large, and they will most likely remain at this level, if not increasing. That's why our product portfolio had to also need to be adjusted to meet the demand. Thank you. Thank you. Your next question for today is from Gary Nash, a private investor. Good morning. Thank you for taking my question. With sales in Brazil rising by almost 50% in the second quarter, what is the capacity utilization and need for more capital investment? [Foreign language] The estimated additional investment is expected to be at the level of $3.5 million. OK, yes, we're very pleased and very proud of our growth in the market of Brazil. It's not only growing at a very rapid pace, like it's 50% year-over-year, but also now it's across the threshold of 10% of total revenue for our overall company. It's very exciting about the Brazilian market. In terms of your question of capacity utilization, we right now have run some three production lines in Brazil facilities, and the utilization is about 90%. We have experienced a bit of a bottleneck on the production process, and that has been solved. In addition to that, we are going to add another production line. Sometime by the end of this year, we'll have four production lines. The new line is ETS product, electric power steering product. We're going to have four production lines in Brazil alone. Total CapEx, as you asked, will be around $3.5 million. Thank you. Thank you. Once again, if you would like to ask a question, please press star one. Your next question is from Kevin Theiss. Kevin, your line is live. Thank you. I have a question from an investor, and he wanted to know a comment, please, that the company is buying back shares and then issuing options for management. He'd like to get some clarification on that. This question that you received on the email was a conversation that he found was needed. Okay. His question is that the company has been buying back shares and also issuing options to the management team. Yeah, that's right. Okay. All right. He's going to give you your. Go ahead, Kevin. I said he would like to have a comment from management. [Foreign language] [Foreign language] Okay. To answer this question, yeah, it's a very good answer. Here's the answer for the question. The company buys back shares because the company sees the stock is undervalued or grossly undervalued, and they want to utilize the cash on the books to create some shareholder value. It's part of a shareholder return program, like any other companies. When you see the stock price is below intrinsic value, you buy the stock. Now, on the stock option plan to issue to give to the management team, it's part of the incentive plan to incentivize middle operational management or even senior management to continue to execute the game plan to support the company's long-term growth, including a number of strategic initiatives from R&D to partnerships. These are critical tools for a company to reward, to award key employees, and also attract talent to join the company. This is no different. This practice going in CAAS is no different from other things happening with Google, Microsoft, Amazon. It's exactly the same thing. The U.S. companies are incentivizing their employees and attracting talent. At the same time, they're using their free cash flow to buy back shares. Okay. Thank you. As a reminder, if you would like to ask a question, please press star one. Okay. I have another question then. Can you discuss the move to the Cayman Islands and what advantages you see to the company and also to the shareholders from this move? [Foreign language] [Foreign language] Okay. Good. Yes, this is another question we received from a few shareholders regarding the redoubling the file to Cayman Islands. This move is mainly for the purpose of reducing the overall cost of being a listed company. As you know, right now, since that we are a U.S. company, a U.S. company, we have to do a quarterly filing 10-Qs and annual reports on 10-Qs. There are a tremendous amount of savings if we move into this new structure. We're still reporting, but the overall cost of reporting is a lot lower as a foreign company. Most of our operations are outside the U.S. anyway. That's one. Two is, even this move domiciled to the Cayman, doesn't change the main things. We are still listed on NASDAQ. The stock ticker is still under CAAS. Our other shareholder reward program, whether it's dividend or share buyback, will continue. In terms of shareholders, there won't be any effect due to this change. Oh, one more thing is, one more thing is being a Cayman company and no longer a U.S. company, gave us business flexibility. As you can see, our business is now expanding globally. We already have a pretty good global footprint. Let me remind everybody on the call. We started off 30-odd years ago as a regional power steering company in China. We quickly grew into a national champion by supporting and supplying to the fast rising domestic brands. Now you see all the brands in the news, whether it's Chery Auto, BYD, Geely, Great Wall. A number of those automakers are now very large automakers by global standard. They're all our major customers, and they started the first sets of power steering with us. We're very proud of that. From there, about 18 years ago, we launched into, we expanded our footprint into the U.S. market. Now you have a formerly known as Chrysler and Ford and our major customers. We have quite large shares with these two companies and a number of products. Our European businesses started taking off. Our relationship with the CES has deepened over the last 15 years. Now we are supplying to a number of European model automakers, auto models. We're growing very fast in terms of our market share. Lastly, we just mentioned earlier, our Brazilian businesses are growing very rapidly. This quarter, 50%, and we're expanding more capacity. Overall, we are a global company now, and we are continuing to expand our footprint. That being said, being a foreign domiciled company or non-U.S. domiciled company will give us a business flexibility to continue to win contracts and expand business and grow market share. Lastly, to build shareholder value. We have reached the end of the question-and-answer session, and I will now turn the call over to Kevin Theiss for closing remarks. I want to thank everyone for participating in today's conference call. We wish you all to be safe, and we look forward to speaking with you in the future. Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.