SunCar Technology Group Inc. Q4 FY2024 earnings call

• SunCar's business is focused on digitalizing China's domestic auto insurance and services markets. - 2024 saw record revenue and profitability with revenue at $442 million and adjusted EBITDA up 500%. - Reinsurance business grew due to auto partners' focus on insurance revenue. - Partnerships with Tesla (expanded to 48 cities), Xiaomi (customized insurance product), and SAIC Maxus (contract for gas vehicle insurance sales). - Auto services business has growth in retail (Sam's Club partnership) and luxury (Chanel transportation services). - Invested in AI technology with positive ROI at the NGAI technology service center.

The company operates in three segments. Auto Insurance revenue was $170.5 million in 2024, up 44.4% from $118.1 million in 2023. Technology Services revenue was $44.9 million in 2024, up 46.4% from $30.7 million in 2023. Auto Services revenue was $226.5 million in 2024, up 5.3% from $215 million in 2023. Adjusted EBITDA increased by 492% to $9.8 million in 2024 from $1.6 million in 2023.

• Currently plan to issue guidance with first quarter 2025 earnings release, subject to market conditions and Board approval.

• Risks include regulatory changes, market competition, and potential indirect impacts from U.S. tariffs on supply chains.

Q: What impact, if any, will U.S. Tariffs have on SunCar's business?

A: We don't currently expect U.S. tariffs will have a material direct impact on SunCar's business as our business is 100% focused on China's domestic auto market. We continue to monitor indirect effects such as potential supply chain disruptions for our partners.

Q: Why have so many EV manufacturers been interested in partnering with SunCar and using your technology?

A: Our team has been in the market for almost twenty years and understands the evolving needs of the EV companies very well. Additionally, SunCar has invested approximately $100 million in its industry specific cloud, AI, mobile apps and data infrastructure. This investment is paying off as we built a very differentiated solution in the market. As our EV partners focus on their customers' post sale journey, they realize that SunCar's insurance technology is the most mature and feature rich in the market.

Q: How do you see your Tesla relationship evolving over time?

A: Tesla continues to be a strong partner in expanding our portfolio of insurance products and sharing our vision of delivering customized full featured services to each driver.

Q: What do you attribute the rapid growth of your insurance business to?

A: Differentiation is key. The competition among EV and gas vehicle manufacturers has grown incredibly tough. For this reason, they are looking at other ways to monetize customer relationships beyond just the vehicle sale. Our technology plays a key role in their digitalization strategy and enables additional downstream revenue opportunities through sales and service options for vehicle owners. We are working collaboratively with these manufacturers to add additional services.

Q: Congratulations on your strong adjusted EBITDA growth. How do you view your profitability tracking over the next year?

A: We're encouraged by our adjusted EBITDA growth and see the continued strong growth of our insurance business as a key contributor to this. Additionally, we are leveraging AI and other technologies to optimize our operations, positively impacting profitability.

Q: How do you view AI impacting your business in 2025?

A: We've been using AI in our business for well over a year. Its impact on our business has been significant as our team is finding new ways to use AI to optimize our operations and add new product features. On the product development front, we plan to integrate AI into as many features as possible to optimize the driver's experience and accelerate our customers' monetization efforts.

Q: How impactful will gas vehicle customers be on your insurance business this year?

A: As we heard in our Insurance segment review, we're making great progress in penetrating the gas vehicle market. SunCar executives have been the featured speakers two years in a row at the largest gas vehicle dealer industry conference. Customer wins at SAIC and Chang'an Deepal dealer group testified that the gas market is accelerating its adoption of digital solutions to drive downstream insurance and maintenance revenue. We have had gas vehicle dealerships successfully using our products for some time. What is more recent is the industry's economic pressures have dramatically increased demand for our solutions from gas vehicle dealers. Their search for new revenue streams has reached a tipping point where they must digitalize to effectively capture as much downstream insurance and maintenance revenue as possible because the gas vehicle market is so much larger than the EV market in terms of existing vehicles, we think it can be very impactful to our business.

Q: What do you see as the future of your Anji AI Technology Services Center?

A: We see Anji and our engineering and product development teams playing an increasingly important role in our business. As we further develop our AI and software development capabilities, the Anji teams will play a critical role in innovating new insurance products. The Anji center is key to working with our auto partners to co-develop custom insurance solutions that meet each of their specific needs and objectives.

Q: What do you see as the most exciting aspect of your services business?

A: Clearly, the emergence of customers from new sectors such as retail and luxury offer new areas of growth for this segment. Additionally, there exists opportunities to explore additional synergies with our insurance business. We believe an increasing number of our EV company insurance customers will want to add our auto services module to their existing insurance and other driver software.

Q: Will you be issuing guidance this year?

A: We currently plan to issue guidance with our first quarter 2025 earnings release subject to market conditions and Board approval.

Q: Do you expect there will be another large employee stock compensation expense this year?

A: No, we don't. Last year's employee stock compensation program was a one-time event under the 2024 equity incentive plan to retain and reward a core group of long-term SunCar employees who had been with the company for many years and were critical to our growth. We do not expect to incur a similar expense in the near future.