Good day, ladies and gentlemen, thank you for standing by, and welcome to CBAK Energy Technology’s Third Quarter 2022 Earnings Conference Call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instruction will follow at the time. As a reminder, we are recording today’s call. If you have any objection, you may disconnect at this time. Now, I will turn the call over to Thierry Li, Investor Relations, Director of CBAK Energy. Mr. Li, Please proceed.

Thank you, operator and hello, everyone. Welcome to CBAK Energy's third quarter 2022 earnings conference call. Joining us today are Mr. Yunfei Li, our Chief Executive Officer; Mrs. Xiangyu Pei, our Interim Chief Financial Officer; Mr. Wenwu Wang, our Vice President; Mr. Xiujun Tian, our Engineer and Mrs. Ya, our interpreter. We released results earlier today. The press release is available on the company's IR website at ir.cbak.com.cn, as well as from 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 US 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 doesn't assume any obligation to update any forward-looking statements, except as required under applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars. With that, let me now turn the call over to our CEO, Mr. Yunfei Li. Mr. Li will speak in Chinese and I will translate his comments into English. Go ahead, Mr. Li.

[Foreign Language] Thank you, and hello, everyone. Thank you for joining our earnings conference call today. In the third quarter, we managed to maintain a strong momentum in the growth of revenues. In Q3, our revenues grew by over five times to approximately $37.7 million, in the first nine months of this year, our revenues have reached approximately $200 million, representing an increase of about seven times compared to that in the same period of last year. significant increase of revenues was fairly attributed to the astonishing growth of our battery business in a booming market. In the third quarter, revenues from our battery business reached about $25.8 million, up by roughly 170%. In the first nine months, revenues from the battery sector surprisingly increased by 167.7% to approximately $66.6 million. [Foreign Language] In addition to our dedication to stabilizing and increasing revenues from the energy storage segment without to have really explore the EV and LEV markets. A few months earlier, we announced to enter into an agreement with JinPeng Group, one of the biggest LEV manufacturers in China and its EV manufacturing unit Jemmell. Such corporation brings our cylindrical lithium batteries on an increasing number of EVs Meanwhile, we are still actively developing larger cylindrical batteries in an attempt to increase our shares in the EV, LEV and energy storage market. In this conference call, I will introduce our progress in both business development and product research and development to our shareholders and investors. [Foreign Language] First, I will present the progress we have made with respect to business development. As of September 30, our three major manufacturing centers, respectively, in Dalian, Nanjing and Shaoxing received orders with approximately $100 million the awaited delivery. Such orders will support rapid growth of our revenues in the coming reporting periods…

Thank you, Mr. Yunfei Li, and thank you, everyone, for joining our call today. I will now go over our key financial results for the third quarter of 2022. For the full details of our financial results, please refer to our earnings press release. We managed to maintain a strong momentum in the increase of sales of our battery and battery material products. The high cost of raw materials and the need to invest in and expand our capacity, however, reduced our profits. As Mr. Li mentioned, we remain confident in the future growth of our profits as long as more raw material producers of bigger capacity and our capacity expansion plan is completed. We also increased significantly our investments in research and development, and sales and marketing efforts to develop new largest cylindrical lithium battery products and to develop clients in the market. Moving on to our results. In the third quarter, our net revenues surged by 500% to $57.7 million from the same period of 2021, primarily due to growing sales in our battery products and battery materials. Specifically, net revenues from our battery business grew by about 170% from the same period of 2021. Cost of revenues was $54.3 million in the third quarter, up by 544% from the same period in the prior year. Gross profit was $3.5 million in the third quarter, representing an increase of 206% from the prior year. Gross margin was 6% compared with 12% in the same period of 2021 as raw material cost rose. As noted earlier, we signed a long-term contract with certain suppliers expanded into raw material business, and from which a negotiation with our clients to tackle the price hike, and we expected the price of raw materials to decrease while new capacity is being added by the industry. Our operating expenses rose by of 14.8% to $4.9 million, primarily due to growing headcount in our new 19 facility and the acquisition of our battery material business, within that, our research and development expenses increased by 31% to $2.4 million. Sales and marketing expenses increased by 64% to $0.8 million, and the general and administration expenses decreased by 14% to $1.9 million. Even with this increase, our operating expenses were held only 8.6% relative to our revenues in the third quarter compared with 45% in the same period of 2021. Our change in fair value of warrants was $0.9 million compared to $23 million in the prior year. Thus, we recorded a net loss attributable to shareholders of CBAK Energy of $290 during the third quarter compared to net income attributable to shareholders of $12 million in the same period of 2021. However, if we deducted the item of change in fair value, we had a net loss attributable to shareholders of CBAK Energy of US$0.9 million, reduced by 68.6% from a US$3 million last year. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, we now begin the question-and-answer session. [Operator Instructions] We have one question from [indiscernible]. Please go ahead.

[Foreign Language] Okay. I have the first question. I am glad to hear that the company has received orders worth nearly €60 million from a major European clients in the past nine months, but the specific name of this company was not disclosed. Could you tell me the reason behind it? And will the state of cooperation with this company will be further expanded in the future?

[Foreign Language] Okay. Well, first of all, this client is a famous company in Europe that witnessed rapid growth in the past few years. And we, as the major supplier for battery products, in order to help the clients to maintain stability in their supply chain, we need to ensure that this cooperation is a confidentiality and we -- and this is also a very good way for us to ensure our competitive edge in the whole market. So please understand that we cannot disclose the name of this company. And talking about the future cooperation potential with this company, I can tell you that we have reach an agreements, and we are going to continuously expand our future cooperation in the coming years. And we believe that, the orders that they place at our company will see a big increase.

[Foreign Language] I noticed that most of the company's revenue still comes from energy storage. In comparison, although the revenue of EV and LEV is growing rapidly, the total amount is still relatively small. How do you see the future revenue composition of the company? Do you think the energy storage segment will still occupy a robust majority of the income, or do you expect the proportion of LEV and EV to grow and even one day possibly surpass that of the energy storage?

[Foreign Language] Okay. This question is concerning the revenue and the proportion of EV and LEV. Well, as Mr. Li just mentioned, we already obtained big orders from EV and LEV manufacturers. And this is a very good signal. And we believe that, the orders that we receive from them will continuously grow in the future. And at the same time, we are also making unremitting efforts to develop new customers, and we believe, we're going to see big progress next year. And then for next year, we have confidence that we will see the increase of the amount of orders that we get from the car manufacturers and the proportion of EV and LEV, the proportion of revenue from EV and LEV will also see big growth. And then, yes, of course, the business of our energy storage will also be on the rise in the future, too. So we believe that the prospects for both energy storage and for EV and LEV will be both promising. And at the same time, we will see the growth of the proportion of EV and LEV in the future steadily.

[Foreign Language] Okay. Thank you for the answer. And I still have a third question. The company is developing sodium-ion batteries. We believe that the target market of sodium-ion battery kind of overlap with the existing target market of lithium-ion phosphate. So how does the company plan to tap the potential of sodium-ion battery in the future? And what is your strategic plan? Can you share with us? Thank you.

[Foreign Language] Okay. So Mr. Tian will answer this question.

Yes. It is sure that the application of sodium-ion battery and the lithium-ion phosphate are similar in some cases. However, according to our experience, the generation of new products or a new system will not fully replace the old one that is the lithium-ion phosphate in our case. And let me share with you our strategic plan for sodium-ion batteries, as we know, it enjoys some strength that is incomparable by other similar products. For example, it enjoys that it can have very good effect in the low temperature condition, and it is more easier to assess the sodium elements and then the cost for -- the cost for sodium is also lower. That is why we plan to use the sodium ion battery, or these products in the storage market as well as the passenger vehicles, especially those LEVs for short distance trip or in the modern area where the temperature is relatively low. So we're going to develop this sodium and battery as a good supplement to leasing and battery. It will become a new product line for our company. But it doesn't mean, we are going to – we are going to replace the lithium ion battery by the sodium battery, or in another word – or in the other case, we are not going to give up some of the research of sodium ion battery just because lithium ion battery has its own advantages. That is to say, we are going to give important to both kind of batteries, and we are going to develop sodium ion battery to expand our product portfolio and also to increase the product coverage.

[Foreign Language] Okay. We have -- I have the last question, the final question, well, I am very glad to hear that the company's revenue has increased tremendously, although the adjusted net profit attributable to the parent company is still in the loss, but the size of loss has been greatly reduced. We understand that, the price of the raw materials this year is still high. But according to your judgment, do you think the price of raw materials will fall down next year? And what kind of impact will it bring to the profitability of your company? And is the company's adjusted net loans attributable to the parent company expected to decline further or even term loss into profit?

[Foreign Language] Okay. As you can see from the financial performance of the third quarter of this year, the profitability is on the rise. However, as we know, this year we are still greatly impacted -- affected, I mean, by the increase of the raw material. And although some of the raw materials have witnessed a decline in the price.\ However, the main raw material was that is the -- the lithium carbonate for the capsule -- hasn't declined. And in contrast, it even increased a little bit. That is why we have increased the sale price of our product with an aim to offset the increase of the price of the raw material. So for those orders that is going to be shipped in the future, I mean, in the rest of this year and in the next year, we'll see an increase in terms of its price. It will be higher than the price that we offer to the customers in the past several months. So we believe that for next year, the profit of our company will have increased.

[Foreign Language] Okay. So that's it for all my questions. I'd like to thank all the speakers for answering my questions, and I am looking forward to the further development and progress of the company.

Thank you for your questions. [Operator Instructions] There are no further question in the queue. Let me turn the call back to Mr. Yunfei Li for closing remarks.

[Foreign Language] 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.