Prepared remarks
Good day, ladies and gentlemen. Thank you for standing by, and welcome to CBAK Energy Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. Operator instructions: As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Irina Tian, IR Specialist of CBAK Energy. Ms. Tian, please proceed.
Thank you, operator, and hello, everyone. Welcome to CBAK Energy's Earnings Conference Call for the Fourth Quarter and the Full Year of 2025. Joining us today are Mr. Zhiguang Hu, Chief Executive Officer of CBAK Energy; Mr. Thierry Li, Chief Financial Officer and Company Secretary; and Yvonne, who will help with our interpretation during the Q&A session. We released our results earlier today. The press release is available on the company's investor relations website at ir.cbak.com.cn as well as from the newswire services. A replay of this call will also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Zhiguang Hu. Please go ahead, Jason.
Hello, everyone. Thank you for joining our earnings conference call for the fourth quarter and the full year of 2025. The fiscal year 2025 was a definitive transitional period for CBAK Energy, characterized by our comprehensive structural upgrade of our product portfolio, aggressive capacity expansion and deliberate pivot toward next-generation form factors. Despite the short-term bottom-line pressure inherent to some massive capacity transitions, our top line growth demonstrated positive momentum. In the fourth quarter, our consolidated net revenue surged by 131.80% year-over-year to $58.80 million. For the full year, consolidated net revenue reached $195.19 million, representing an 11% increase over 2024. Let me detail the structural transition driving our core business. At our Dalian facility, our customers are actively transitioning away from our legacy 26-series battery product line with over a decade of history and 1 gigawatt hour capacity to our newly introduced highly advanced Model 40135 cells. To support this paradigm shift, we successfully commissioned a new 40135 product line with 2.3 gigawatt hour capacity at the end of 2025. The market reception has been truly unprecedented. Demand for the 40135 cells currently far exceeds our available supply. Meaning, we are selling every single unit we can produce, and our order book heavily outpaces our current ramp-up trajectory. Similarly, at our Nanjing facility, to alleviate the severe supply shortage for our highly sought after model 32140 cells, we successfully added two new production lines at our Phase II facility at the end of 2025. This expansion adds 3.0 gigawatt hour of much-needed capacity to complement the 1.5 gigawatt hour already operational in Phase I. And we expect these two new high-speed lines to reach full capacity by early 2027. Both our Dalian and Nanjing expansion are currently in an intensive capacity ramp-up phase. While this initial phase carries higher unit cost that have temporarily suppressed our gross margin and the short-term profitability, we view this as a necessary and highly strategic investment as our customers complete their transition to the Model 40135 and our Phase II facility completes its ramp up by early 2027. We anticipate a dramatic and sustained resurgency in our top line revenue. Furthermore, to present the value chain, starting in 2025, our wholly-owned subsidiary, Nanjing BFD, initiated dedicated battery pack integration operations by assembling individual cells into complete plug-and-play battery systems, which bypass intermediate integrators to serve end users directly. Currently, these manufactured pack units are predominantly engineered for the light electric vehicle battery swapping infrastructure throughout the African market. In 2025, we officially forged a deep strategic partnership with SPIRO, one of Africa's largest two-wheeler battery swapping enterprises. I'm thrilled to report that SPIRO has rapidly scaled to become one of our top five customers. We are incredibly proud that our advanced battery cell technology is providing the essential momentum for Africa's new energy transition. To deepen this relationship, we are exploring further collaborative models, including the potential establishment of a dedicated corporate entity within the Africa region to directly assist and accelerate SPIRO's localized business expansion. This African success is mirrored across other key international markets, driving our explosive global growth where revenue from our international markets skyrocketed by 252% year-over-year to $36.36 million for the full year. In India and broader global markets, our institutional client base has expanded significantly. We have established deep collaborations with highly prestigious international blue-chip customers, including Anker Innovation, Scania, which became our direct ordering entity following its acquisition of a Northvolt business unit that originally procured our products and is now operating under Posida, as well as Ather Energy, Schneider ACE Battery and Inverted Energy. The endorsement from these global Tier 1 enterprises provides the strongest possible validation of our product reliability and safety. Similarly, in Vietnam, we have forged a tight-knit partnership with a key client DAT as DAT's business volume has skewed our shipment volume in the Vietnamese two-wheeler sector, which has experienced exponential growth. As investors may be aware, the PRC government has initiated a phase-out policy for export tax rebates, reducing the rate for lithium-ion batteries from 13% to 9%, with further reductions to 6% by April 2026 and a complete elimination by January 2027. To proactively establish a dialectical hedge against this macroeconomic headwind and protect our international margins, we moved decisively to localize our global supply chains. We have already incorporated our Malaysian subsidiary on April 30, 2025, and are actively pushing forward with physical construction of a manufacturing facility there within this year to offer diversified tariff-insulated sourcing options for our top-tier international clients. We also anticipate signing and announcing additional contracts with major international clients, which we believe will serve as strong catalysts for our shareholders. Our raw material segment, Hitrans, delivered a powerful turnaround, benefiting from an ongoing upward cycle in raw material prices. Hitrans experienced a sharp operational rebound beginning in the third quarter of 2025. Full year revenue for this segment surged 123% year-over-year to $89.21 million. As the raw material pricing cycle continues its robust upward trajectory, we confidently anticipate Hitrans will reach new performance highs. To structurally capture this momentum, Hitrans is aggressively expanding its proprietary infrastructure, including the ongoing construction of a new 10,000 metric ton cathode manufacturing plant slated for full operation in the first half of 2027, alongside a massive 37,000 metric ton precursor facility. This strategic capacity injection will decisively elevate Hitrans' revenue starting in 2026 and beyond. Strategically, we are also advancing our corporate structure. Our stockholders have approved a redomicile merger to change our place of incorporation from Nevada to the Cayman Islands. This move will allow us to streamline operational and administrative efficiency while similarly aligning our corporate structure with our aggressive international expansion strategy. Driven by the insatiable demand for our new 40135 and the 32140 battery cell, the pending completion of our capacity ramp-ups, the continued strength of Hitrans and our expanding footprint across the global LEV market, we project with absolute confidence that our consolidated sales will hit a record high in 2026, delivering explosive growth. Now let me turn the call to our CFO, Thierry Li, for a deeper dive into our financials.
Thank you, Jason. 2025 demonstrated the resilient dialectical nature of our vertically integrated business model. While our Battery segment faced margin compression due to the aggressive ramp-up of our new production lines and rising raw material costs, our Hitrans raw materials segment capitalized on this exact macroeconomic environment. Looking at our fourth quarter results: Consolidated net revenues reached $58.80 million, a 131.8% increase compared to Q4 2024. This hyper growth effectively decoupled from the temporary bottom line pressures caused by our ongoing capacity transitions. Within this, our Battery Business revenues were about $30.82 million, an increase of 35.8% year-over-year. Despite a 10.6% decrease in the energy storage sector caused by the phase-out of legacy Model 26650 cells at Dalian, we offset this decline through explosive growth in the LEV revenues, which skyrocketed by 524.2% to $12.92 million in the fourth quarter. Our Hitrans segment generated $27.98 million in Q4 2025, a massive 944.1% surge from Q4 2024, directly reflecting the escalating upward cycle of raw material pricing and robust downstream order placements. Our gross profit for Q4 2025 was about $4.28 million, representing a gross margin of 7.3% compared to 13.1% in Q4 2024. This sharp margin compression was fundamentally driven by the transactional friction costs, suboptimal yields and disproportionately high fixed cost absorption inherent to the initial ramp-up phase of the new Model 40135 in Dalian and Phase 2 Model 32140 lines in Nanjing. Consequently, operating loss for the fourth quarter was about $8.01 million, and the net loss attributable to shareholders was $7.38 million. For the full year 2025, net revenues were $195.19 million, up by about 11% year-over-year. Hitrans contributed $89.21 million, up by 123%, while the Battery Business contributed $105.98 million. Gross profit for the year was about $18.42 million, representing a margin of 9.4%, down from 23.7% in 2024. Operating expenses increased to $36.86 million, up 12% year-over-year, driven by a 21% increase in R&D to $15.8 million. This deliberate expansion directly funded our next-generation technology roadmap, specifically accelerating the development of our advanced large-format cylindrical models such as the 60115, 60135 and 60150 as well as highly specialized sodium-ion chemistries engineered for extreme low temperature resilience and fast-charging capabilities. We also increased G&A by 16% to $16.20 million, reflecting increased headcount for our new production lines. Our full year operating loss was about $18.44 million, and the net loss attributable to shareholders was about $9.38 million. However, analyzing the bottom line requires a dialectical view of our risk management framework. First, our other income surged to $8.27 million, fundamentally bolstered by a highly lucrative $5 million compensation payment we strictly enforced and successfully collected from a canceled customer order. This underscores the robust legal and contractual protections we secure in our commercial agreements. Second, to proactively shield our margins from global volatility, 2025 marked our inaugural deployment of a substantive financial hedging structure. We systematically executed foreign currency forward contracts, options, swaps and commodity contracts. While this proactive risk mitigation resulted in a calculated noncash derivative fair value loss of approximately $0.44 million, it effectively neutralized extreme macroeconomic fluctuations and provided essential cash flow predictability for our supply chain. Turning to our balance sheet and liquidity: Our financial foundation remains robust and highly liquid. As of December 31, 2025, we held cash and cash equivalents and restricted cash of $75.68 million, an increase from $60.79 million at the end of 2024. Notably, despite reported net loss, our net cash provided by operating activities was extremely strong at $48.55 million for the year compared to $39.70 million in 2024. This powerful cash generation was primarily attributable to disciplined working capital management, including a $63.66 million increase in trade and bills payable. We allocated $44.65 million to capital expenditures in 2025 to fund aggressive construction and equipping of our new production facilities across Dalian, Nanjing, Zhejiang and Anhui. In summary, the temporary margin squeeze is a calculated byproduct of scaling next-generation capacity. With the Hitrans segment providing a dialectical hedge in raw material costs, our battery capacity ramp-up scheduled for completion in early 2027, and our deeply integrated global expansion progressing rapidly, we are structurally positioned for a massive operational turnaround and record-breaking sales. Thank you, and we will open the floor for the Q&A session. Operator, please go ahead.
Questions and answers
Operator instructions: We will now take the first question. The first question is from the line of Brian Lantier from Zacks Small-Cap Research.
Fantastic news to see Hitrans suddenly turning things around. I wonder if you could talk a little bit about where you see gross margins in the Battery Business? And when you think they might normalize as you ramp up capacity?
Thank you, Brian. Let me answer your question. So, when our Nanjing Phase 2 and our Dalian operations and new products kicked in in Q3 and Q4, our gross margin was affected severely. Right now, we are in a phase of ramping up capacity. We believe that the Dalian facility ramp-up would be completed in the first half of this year, and we have already received more than enough orders for these new products. For Nanjing Phase 2, because it's much bigger, our timeline is early 2027. We are confident and will try our best to accelerate, targeting the second half of 2026, but a reasonable timetable is early 2027. Ideally, in the second half of this year, our gross margin will gradually recover. And I believe in the full year of 2026, the gross margin number will at least look better than right now.
Great. And could you describe a little bit more about the cell packing business? And do you see that becoming a growth opportunity for the company, particularly in the LEV market?
I will answer the question first and then, Yvonne, please help with the interpretation for Jason, and Jason I think can add some points. So, we have received a substantial order from one of our major African customers, which actually originates from India. Starting early 2025, this substantial order kicked in and most — I think all — of the cell purchases were from Nanjing 32140. To fulfill that order, we have already set up a battery pack assembly unit within our structure, and this unit is dedicated to purchasing cells from our Nanjing factory, assembling the cells into battery packs and selling them to the African customer. This customer has already become one of our top five customers as of 2025. We are also looking forward to a much deeper and more comprehensive collaboration with this customer. In the future, our collaboration may extend beyond LEV into the energy storage sector. Please, Jason, see if there is anything you want to add.
Interpreter (speaking in Chinese): The CEO would like to add a brief comment.
I would add that the advantage of our battery cells in the LEV market has already been demonstrated in the Southeast Asia and Indian markets. Our products, whether cells or battery packs, perform very well in high temperature environments. This is critical for these applications. We believe we can replicate the same success in other regions.
Great. That's really helpful. I guess one final question. Are you seeing anything on the energy storage front as it relates to grid storage and BESS companies? And is that impacting your R&D plans for new cell formats that could come out at the end of the decade?
I think that's a question for Jason.
Interpreter (speaking in Chinese): Please allow me to respond. (Interpreted) For the ESS market, we are currently focusing on home ESS, balcony ESS and portable ESS, which are smaller-size systems. In addition, we are conducting research and development on big prismatic cells that can be used in grid-scale energy storage systems. That will be one of our target products for that market.
Operator instructions: We will now take the next question. This is from the line of Charles Nemec, an individual shareholder.
Now I've reviewed the 40135 ramp-up data and the margin compression. I have a structural and validated solution for the thermal wall and charging limitations impacting you daily in production. I submitted a brief to your executive inbox, and I sent one to your engineer as well, and I'm just wanting to confirm that you've received that. If we could make a time to discuss those matters in a private forum?
Which engineer or which email address did you contact?
The email I sent it to is ir@cbak.com.cn. I can resend it. I sent them on the 28th early in the morning. I sent one to the CEO, the second in command and your engineer — all of you got a copy through that email and I tagged you all.
Okay. There are thousands of emails coming in daily, so maybe it went to the junk box or it may have been filtered. Can you just resend the email and we'll make sure the related personnel review it.
Seeing no more questions in the queue, I will turn the call back to Jason for closing remarks.
Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.
Thank you all again. This concludes the call. You may now disconnect.