China Automotive Systems, Inc. Q2 FY2025 earnings call

• Sales increased 11.1% YOY to $176.2 million in Q2 2025. - EPS products' sales mix shifted to 41.2% of total sales, up from 35.1% in Q2 2024. - Henglong KYB's EPS products grew 26% YOY. - Jiulong’s commercial vehicle steering products grew 25.6% YOY. - Government incentives in China supported vehicle purchases. - Second-generation IRCB for heavy-duty vehicles in mass production with new orders in July. - R-EPS system for Nanjing Iveco entered mass production. - Shashi Jiulong won awards from commercial vehicle OEMs. - Plan to redomicile corporate registration from Delaware to Cayman Islands to save costs and enhance operations.

In the second quarter of 2025, total sales increased to $176.2 million, up 11.1% YOY. Electric power steering systems (EPS) saw sales rise 31.1% YOY to $72.9 million, making up 41.2% of total sales. Traditional hydraulic steering systems from Henglong had sales of $83.4 million, a 4.2% YOY increase. Jiulong’s commercial vehicle steering products grew 25.6% YOY. North American sales were $30.8 million, up 14.9% YOY, and Brazilian sales jumped 49.4% YOY, accounting for 10.1% of total sales.

• Management raised revenue guidance for full fiscal year 2025 to $720 million.

• Prolonged disruptions in manufacturing, delivery, or assembly processes could lead to delays, increased costs, and reduced revenue. - Factors from risk factors in Form 10-K could adversely impact business, financial condition, and results of operations.

Q: Why has the income tax rate increased in 2025?

A: The increase is due to higher pre-tax profit and a slightly ticked-up tax rate, with last year having a $1.5 million tax adjustment affecting tax provision.

Q: Why was R&D flat at $8.1 million in Q2 2025 and what's the outlook?

A: Q1 had overspent R&D, so Q2 was flat; first half R&D expense was $16.8 million vs $13.5 million YOY; full-year R&D expected to be $32-35 million, 5% of total revenue, 80% for EV-related products.

Q: With Brazil sales rising 50% in Q2, what about capacity utilization and capital investment?

A: Brazil facility has 3 production lines with 90% utilization, adding a 4th production line for EPS products, with ~$3.5 million CapEx.

Q: Comment on share buyback and issuing options to management?

A: Share buyback due to undervalued stock to create shareholder value; stock options for management incentivize growth and attract talent, similar to other companies.

Q: Discuss move to Cayman Islands?

A: Redomicile to reduce reporting costs, still listed on NASDAQ, no effect on shareholders, provides business flexibility for global expansion and building shareholder value.