Good day, ladies and gentlemen. Thank you for standing by, and welcome to the CBAK Energy Technology's Third Quarter 2024 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 Xiujun Tian, IR Specialist of CBAK Energy. Ms. Tian, Please go ahead.

Thank you, operator, and hello, everyone. Welcome to CBAK Energy's earnings conference call for the third quarter 2024. And joining us today are Mr. Zhiguang Hu, or Jason, Chief Executive Officer of CBAK Energy; Mr. Jiewei Li, Chief Financial Officer and Secretary of the Board; our General Engineer, Mr. Xiujun Tian and [Yvan], who will help with our interpretation will join us for a Q&A section. We released our 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 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 doesn't assume any obligations 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 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 third quarter of 2024. I'm pleased to report on the performance of our battery business for the third quarter and the first nine months of this year. Although, the net revenue from our battery business slightly declined to $33.5 million in the third quarter. The overall revenue of the battery business in the first three quarters achieved a year-on-year growth of 18.4 percentage, reaching $114 million. This is quite remarkable considering the general pressure and the downturn in the entire new energy industry. The main reason for the decline in the net revenue from our battery business in the third quarter was a 1-month suspension of the production line of our Dalian facility in September. As the production line has been operating at full capacity since the beginning of the year, the continuing operating production line resulted in an exceptionally high energy cost and needed to be suspended for refurbishment. We would like to provide a closer look at the revenue breakdown in our battery business. The revenue from battery for energy storage sector reached $33.46 million, a 25 percentage decrease compared to the previous year. EV battery contributed $333,000, a decrease of 17 percentage compared to the same period last year. Battery for light electric vehicles, including 2-wheelers and 3-wheelers brought in $4.9 million, a year-on-year increase of 341 percentage. Overall, our battery business remains focused on energy storage market supplemented by our endeavor to continue exploring the light electric vehicle market with the increase in order from our Indian and Vietnamese customers. We believe that the revenue proportion of light electric vehicles will gradually increase. Our battery business has maintained a high gross profit margin, reaching 34.3 percentage in the first three quarters of this year,…

Thank you, Jason, and thanks, everyone, for making time to join our earnings conference call today. Since Jason has introduced our key financial metrics, in the interest of time, I will not be duplicating the presentation of the numbers. We encourage you to refer to our press release issued earlier today for complete details. In the third quarter, our battery business experienced a slowdown. As Jason mentioned in his remarks, this was primarily due to a 1-month suspension of production at our Dalian factory. For the first eight months of the year, the factory operated at full capacity without any breaks, which led to a significant increase in energy costs. To mitigate these costs and enable upgrades, we paused operations for a month. During this period, we optimized energy usage and upgraded one production line to support the production of our new tablet model to 26650 cells. As for our Nanjing factory, now in its third year, it has successfully transitioned into a profitable production center with a steady flow of orders fully booking its capacity. Currently, we face a supply shortage of approximately 5 million cells from Nanjing, underscoring the strong demand. Looking ahead, although our gross margin has been exceptionally high, we anticipate a gradual return to more typical levels, yet still higher than industry competitors. In summary, our Dalian factory has long been a key contributor to our net profits, while our Nanjing facility initially incurred losses due to construction, setup of new production lines and the promotion of new battery models. Now that Nanjing has turned profitable, we expect that both factories will drive our financial growth in the future. With the expanded capacity in Nanjing next year, we remain optimistic about the company's performance. Thank you, and we will now open the floor for the Q&A section. Operator, please go ahead.

[Operator Instructions] We will now take the first question from the line of Brian Lantier from Zacks Small-Cap Research. Please go ahead.

Good morning, everyone. I appreciate all the updates. That you're navigating a difficult environment and having success is good to see with some of the new products. I guess, the first question is just around some of the weakness that you're seeing in the battery business. Is it principally derived from pricing pressures, from competitors or is it more on the demand side from some of your clients in Europe?

So first of all, as we are using the tablet design for our 26650, then we can increase the C-rate performance of the cell. So this will help us achieve, like, more easily to let our product to be used in the start-up battery business, especially the start-up battery for the new energy vehicle and also the combustion engine vehicle as well. So from this new business, we can get a reasonable profit. So secondly, for our energy product, then we gradually increased the capacity of our product. So in terms of the industry, then compared to our competitor, we have more energy density from ourselves, so which makes our product more compatible. To summary, that's all the answers for myself.

I'll jump back in with another question, if that's okay. How frequently do you anticipate doing maintenance shutdowns like you did at Dalian? Is this an annual process or every three to five years that you would do this?

So the shutdown from Dalian factory is mainly because we are upgrading our product from the energy battery cell to the high series battery cell. So it's an optimization and also the upgrade of our production line. So this is -- in order to carry on this optimization, then we need to shut down the cell to do this. And the reason why we are doing that is also decided by the market trend. So and also for this shutting down, we have already planned in the first half of this year. So this is the normal operation as planned from the start of the year.

Yes. And also, as we just mentioned in our remarks, the other reason for the suspension of production at Dalian for one month is simply because the Dalian factory has been operated since the very beginning of the year until September without any breaks. So the energy cost was so high at the moment that we decided that we can suspend the production to reduce energy cost. On the same time, we have time to upgrade our production lines.

The LEVs are obviously a bright spot right now. Is that principally coming from Vietnam and India?

Sorry, can you repeat your question?

Sorry, the LEV business, the light electric vehicles, is that demand principally coming from customers in India and Vietnam?

Yes. So the main business for the LEV is mainly Southeast Asia area, so that includes India, Vietnam, Indonesia, et cetera. So for these countries, they cannot produce the battery by themselves, so they are relying on to import the battery from China. So in terms of all of the cell manufacturers in China, our products are the most stable. So that's why you can see a dramatic increase of our demand.

The last one for me is, I think I heard you mention the prospect of overseas expansion. If I heard that correctly, any details on that, where you're looking, time lines, things like that?

I will directly respond to your question, Brian. At this moment, the only information we can tell you is that this is simply client-driven. We have certain big clients coming to us saying that we need to accelerate the setup of overseas factory. So with that demand, we're actually looking for some places that fits our best of interest. Certainly, U.S. is under our consideration, but we have not yet decided which country that we are going to build our production lines. And also, we will not do it solely by ourselves. We are actually looking for domestic partners that can help us manage the daily operations and also some government issues, applications, management, something like that. So it's still in an early stage, but the management take this issue as one of our routine jobs. We have -- right now, we're having very serious discussions with a lot of parties. This is the only thing we can review. And as we mentioned in remarks, our clients are very willing to place orders in advance to push us to build up this factory.

Okay. Great. Thank you very much.

Thank you. [Operator Instructions] Seeing no more questions in the queue, let me 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.

Thank you all again. This concludes the call. You may now disconnect