CBAK Energy Technology, Inc. (NASDAQ:CBAT) This autumn 2023 Earnings Call Transcript March 15, 2024

CBAK Energy Technology, Inc. is not one of many 30 hottest shares amongst hedge funds on the finish of the third quarter (see the details here).

Operator: Good day, women and gents. Thank you for standing by. Welcome to CBAT Energy Technology’s Fourth Quarter and Full-Year of 2023 Earnings Conference Call. Currently, all members are in listen-only mode. Later we’ll conduct a question-and-answer session and directions will comply with at the moment. As a reminder, we’re recording at the moment’s name. If you may have any objections, you might disconnect presently. Now, I’ll flip the decision over to Thierry Li, CFO and Secretary of the Board of CBAK Energy. Mr. Li, please proceed.

Thierry Li: Thank you, operator. And hi there, everybody. Welcome to CBAT Energy’s fourth quarter and full-year of 2023 earnings convention name. Joining us at the moment are Mr. Yunfei Li, Chief Executive Officer of CBAT Energy, myself, Chief Financial Officer and Secretary of the Board; and Jennifer, our interpreter. [Technical Difficulty] Before we proceed, please word that at the moment’s dialogue will include forward-looking statements made beneath the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements contain inherent dangers and uncertainties as such, the corporate’s precise outcomes could also be materially completely different from the expectations expressed at the moment. Further info concerning these and different dangers and uncertainties is included within the firm’s public filings with the SEC.

The firm would not assume any obligations to replace any forward-looking statements besides as required beneath relevant legal guidelines. Also, please word that, until in any other case acknowledged, all figures talked about through the convention name are in U.S. {dollars}. With that, let me now flip the decision over to our CEO, Mr. Yunfei Li. Mr. Li will converse in Chinese and I’ll translate his feedback into English. Go forward, Mr. Li.

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Yunfei Li: [Foreign Language] [Interpreted] Hello, everybody, thanks for becoming a member of our fourth quarter and full-year 2023 earnings convention name. We are happy to announce one other quarter of strong development, routing off fiscal yr 2023 on a excessive word. With sustained orders from key shoppers together with Viessmann Group, Anker Innovations and Hello Tech. Our battery enterprise maintained its development momentum from the earlier quarter with fourth quarter revenues, up 30.9% year-over-year to succeed in $36.83 million. Of these revenues $34.93 million got here from batteries utilized in power storage purposes, a surge of 84.3% year-over-year, whereas $0.52 million got here from batteries utilized in electrical autos, down 88.8% year-over-year. Moreover revenues from batteries utilized in gentle electrical autos have been $1.38 million, a decline of 69.5% year-over-year, primarily attributable to [Technical Difficulty] 12 month.

Accordingly, we’ll strategically monitor each sectors, whereas additional increasing our gross sales in power storage sector. In phrases of profitability, our battery enterprise’s gross margin rose to a historic excessive of 36% within the fourth quarter of 2023, up 27.7 share factors year-over-year. Moreover, we achieved a second consecutive quarter of internet earnings from battery enterprise. Recording a internet earnings of $6.62 million within the fourth quarter of 2023, a notable enchancment in comparison with a internet loss in the identical interval final yr. In full-year 2023, our battery enterprise generated revenues of $133 million, hovering by 40.4% year-over-year. We delivered a full-year working earnings of $10.44 million with a internet earnings of $13.37 million from the battery enterprise based mostly on addition.

In 2023, we made vital strides in our enterprise operations on all fronts, attaining progress at numerous levels. Through constant requirement of battery applied sciences and manufacturing ramp-up, we successfully fulfill buyer orders and have nurtured a decrease, steady consumer base. We have fostered deep and strong partnerships with trade leaders worldwide, together with Viessmann Group, a number one supplier of residential power storage software in Europe and one of many world’s largest producers of heating and cooling techniques. Anker Innovations, the most important third-party accent provider for Apple Incorporated merchandise. Hello Tech, the most important provider of outside moveable power storage globally and mother or father firm of Jackery. PowerOAK, the world’s main moveable energy station producer and the mother or father firm of top-rated moveable energy provide model, Blue TTI and India-based NSURE Energy, amongst others.

We have additionally cast a partnership with the most important battery producer in Europe. However, resulting from confidential [Indiscernible] obligations, we can not disclose their id for now. In addition, we’ve been negotiating with key stakeholders in Canada’s electrical car trade, exploring potential collaborations with the intention of formalizing agreements. We will maintain our shareholders and buyers in type of these developments after securing consent from our shoppers. Furthermore, we anticipate to ascertain a partnership with a number one India-based scooter producers in 2024. These partnerships and potential alliances show the broad recognition of our battery applied sciences and product excellence by top-tier gamers within the international battery sector.

Moving ahead, we’ll stay dedicated to technological innovation to bolster our product competitiveness, delighting clients with secure and dependable merchandise. Turning to our order demand. As of March 8, 2024, we’ve recorded RMB771 million or roughly $107 million within the mixed worth of orders we’ve obtained, however have but to meet throughout our two principal manufacturing services in [Technical Difficulty] and Nanjing and [Technical Difficulty]. Additionally, we’ve made substantial energy in our beforehand disclosed consumer initiatives. As of March 8, 2024, our collaboration with PowerOAK has introduced us orders amounting to roughly RMB61.6 million or roughly $8.57 million. Our partnership with Viessmann Group has generated orders totaling EUR213 million or roughly $195 million.

Furthermore, our [Technical Difficulty] Next, let me stroll you thru our newest R&D developments. In the second quarter of 2023, we efficiently commenced mass manufacturing of enormous surgical sodium ion batteries, rising as one of many few firms worldwide with the capability to mass-produce sodium ion batteries. Our sodium ion battery manufacturing traces are at present situated at our Nanjing facility, which encompasses a 0.5 gigawatt hour capability. Since we commenced mass manufacturing demand for our sodium ion battery has out straight provide. As a outcome, we’ve been actively participating with PE buyers to ramp up sodium ion battery manufacturing capability. In the meantime, we’ve additionally been creating massive synergical lithium ion battery fashions, together with mannequin 40140 and 46120.

Model 40140 is in prototype A pattern stage and mannequin 46120 is already in prototype B pattern stage. We anticipate mannequin 46120 to finish prototype B pattern stage and grow to be prepared for mass manufacturing by the latter half of 2024. We will proceed to finetune these fashions in response to market demand dynamics, doubtlessly resulting in modifications earlier than the beginning of manufacturing. We have additionally strategically optimized our manufacturing capability with a well-coordinated manufacturing line format, at present at our Dalian facility, we function three manufacturing traces, primarily manufacturing mannequin 26650 lithium-ion phosphate batteries with a complete annual manufacturing capability of 1 gigawatt hour, to higher tackle buyer wants and mitigate provide shortages at our Dalian facility attributable to extreme demand.

In 2023, we leased a battery plant situated in Changzhou Hunan for producing mannequin 26700 batteries. Today, our Changzhou facility is provided with a manufacturing capability of 0.5 gigawatt hour ample to meet a part of our buyer demand. This strategic transfer additional boosted our manufacturing capability, guaranteeing a extra steady and dependable provide of merchandise to shoppers. Regarding our Nanjing facility, the Nanjing Phase 1 challenge consists of two manufacturing traces, one devoted to [Technical Difficulty] product mannequin 32140 synergical lithium ion batteries and the opposite outfit ought to produce both synergical lithium batteries or synergical sodium ion batteries. The challenge’s capability is as much as 2 gigawatt hours when each traces are producing lithium ion batteries or as much as 1.5 gigawatt hours when one manufacturing line is devoted to sodium ion battery manufacturing.

Furthermore, development of our Nanjing Phase 2 challenge is in full swing with three massive factories within the pipeline. Once all three are accomplished and operational, the full capability of Nanjing Phase 2 challenge is predicted to be as much as 18 gigawatt hours. Thus far, the primary manufacturing unit has been routed and inside ornament is underway. We will decide whether or not to outfit this manufacturing unit with manufacturing traces for sodium ion or lithium-ion batteries based mostly on buyer demand. Moving ahead, we’ll additional optimize our manufacturing line format to reinforce manufacturing effectivity, guaranteeing that we will reply swiftly to market shifts and order fluctuations. In abstract, regardless of the tepid macroeconomic surroundings and downward pressures throughout the battery sector, our battery enterprise persistently demonstrated strong development momentum and resilience within the full-year 2023.

The vitality was mirrored each in our robust monetary metrics and within the stability of our consumer base and the wealth of orders in our pipeline. More importantly, the corporate’s trade management and technological age have been totally acknowledged by throughout the trade evidenced by the adoption of our merchandise by probably the most superior battery facility in Europe. As a pioneer within the sodium ion battery manufacturing, we possessed the immense potential and aggressive benefits within the renewable power subject. Looking forward to 2024, we’ll additional improve our investments in analysis, growth and manufacturing capability. Also, by fostering extra and deeper collaborations with international famend shoppers, we’ll additional increase our market share and elevate the corporate’s international affect and visibility.

We are assured that these synchronized endeavors will section our place as a frontrunner within the aggressive trade for years to return. Now, let me flip the decision over to our [CFO] (ph), Mr. Li, who will present particulars on our monetary efficiency.

Thierry Li: Thank you, everybody, for making the time to hitch our earnings convention name at the moment. As our CEO talked about earlier, we concluded the yr with a strong fourth quarter monetary efficiency from our battery enterprise, the place we achieved a double-digit improve in internet revenues and optimistic earnings for the second consecutive quarter. We are happy to see continued development momentum in our battery enterprise. Building on our strong fundamentals, we stay assured in our development transitory via 2024 and anticipate a full-year internet revenue for our battery enterprise. We will present extra particulars on our internet earnings steerage on the acceptable time. Turning now to Hitrans, our present battery materials unit, which we strategically acquired in 2021, on the time of the acquisition, Hitrans boosted a robust consumer base and a better stage of income.

Following the acquisition we preserve Hitrans core administration workforce and chorus from interfering in its day-to-day operations. We don’t have any addition, no monetary obligations to Hitrans and its monetary well being won’t materially have an effect on the monetary standing of our [Technical Difficulty] as is just mirrored in our consolidated monetary statements. That’s why we’ve centered on reporting monetary outcomes solely from our battery enterprise in our earnings launch and earnings convention name to offer buyers and shareholders with a transparent understanding of our efficiency. We are at present speaking with personal fairness buyers for Hitrans and sodium ion battery enterprise, and we hope to finish a personal placement financing to help the event of our enterprise.

These buyers, whether or not they’re focused on Hitrans or the sodium ion battery enterprise, a persistently valuing the person companies supplies and sodium ion batteries and greater than the present market capitalization of our whole public firm. Notably, their valuations don’t consider our core lithium battery enterprise, indicating that our market worth is at present considerably underestimated. I’ll now present an summary of our 2023 fourth quarter monetary outcomes. In the curiosity of time, I shall be presenting abbreviated highlights solely. We encourage you to consult with our press launch issued earlier at the moment for full particulars. In the fourth quarter, our whole internet revenues elevated by 3.2% year-over-year to $56.2 million.

Net revenues from gross sales of batteries reached $36.8 million, a year-over-year improve of 30.9%. Our whole gross revenue grew 235.3% year-over-year to $12.7 million leading to a gross margin of twenty-two.6%, in comparison with 7% within the prior yr interval. Gross revenue for the battery enterprise elevated by 470.8% year-over-year to $13.2 million, with gross margin climbing to 36% from 8.3% within the prior yr interval. Our whole working loss amounted to $5.9 million, in comparison with an working lack of $8.8 million within the prior yr interval. Net loss attributable to shareholders of CBAK Energy after deducting the change within the honest worth of warrants was $4.8 million, in comparison with a internet lack of $11.7 million within the prior yr interval. Net earnings from the battery enterprise was $6.6 million, in comparison with a internet lack of $6.4 million in the identical interval of 2022.

As we talked about earlier, we’ve a lot of prestigious shoppers world wide. However, resulting from confidentiality of agreements, we can not disclose their names with out their consent. Going ahead, we’ll actively talk with them as a part of our buyer disclosure. We hope to have the ability to disclose extra consumer names to our shareholders in 2024. In conclusion, our strong fundamentals will proceed to offer a strong basis for our enterprise going ahead, enabling us to strike a wholesome steadiness between development and profitability. That concludes our ready remarks. Let’s now open the decision for questions. Operator go forward.

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