China Automotive Systems Inc (CAAS) 2022 Q4 法說會逐字稿

Good morning, everyone, and welcome to the China Automotive Systems' Fourth Quarter and Fiscal Year 2022 Conference Call. (Operator Instructions) Please note, this conference is being recorded.

大家早上好，歡迎來到中國汽車系統公司 2022 財年第四季度電話會議。 （操作員說明）請注意，正在錄製此會議。

I will now turn the conference over to your host, Mr. Kevin Theiss of Investor Relations. Kevin, you may begin.

我現在將會議轉交給您的主持人，投資者關係部的 Kevin Theiss 先生。凱文，你可以開始了。

Thank you, everyone, for joining us today. Welcome to China Automotive Systems' 2022 Fourth Quarter and Year Conference Call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation.

謝謝大家今天加入我們。歡迎來到中國汽車系統公司 2022 年第四季度和年度電話會議。今天加入我們的是中國汽車系統公司首席財務官李傑先生。在翻譯的幫助下，他將在電話會議的稍後時間回答問題。

Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading of Risk Factors in the company's Form 10-K annual report for the year ended December 31, 2022 as filed with the Securities and Exchange Commission and in other document filed by the company from time to time with the Securities and Exchange Commission.

在我們開始之前，我會提醒所有聽眾，在整個電話會議中，我們可能會發表可能包含前瞻性陳述的陳述。前瞻性陳述僅代表公司截至本次電話會議之日的估計和假設。因此，由於多種因素，公司的實際結果可能與這些前瞻性陳述中包含的結果存在重大差異，包括公司 10-K 表格年度報告中截至 12 月的年度報告中風險因素標題下描述的那些因素2022 年 31 日提交給美國證券交易委員會，以及公司不時向美國證券交易委員會提交的其他文件。

As the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial conditions may be materially and adversely affected as a result of a deteriorating market outlook for automobile sales, the slowdown in regional, national, and international economic growth, weakened liquidity and financial condition of our customers and other factors that we cannot foresee. Any of these factors and other factors beyond our control could have adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict materially and impact our business, financial condition and results of operations. A prolonged disruption of any further unforeseen delay in our operations for the manufacturing, delivery and assembly process within any of our production facilities could continue to result in delays and the shipment of products to our customers, increased cost and reduced revenue.

由於 COVID-19 的爆發沒有得到有效和及時的控制，我們的業務運營和財務狀況可能因汽車銷售市場前景惡化、地區、國家和國際經濟增長放緩而受到重大不利影響，我們客戶的流動性和財務狀況減弱以及我們無法預見的其他因素。任何這些因素和我們無法控制的其他因素都可能對整體商業環境產生不利影響，在我們開展業務的地區造成不確定性，導致我們的業務以我們無法預測的方式遭受重大影響，並影響我們的業務、財務狀況和操作結果。我們任何生產設施內的製造、交付和組裝過程的運營中任何進一步不可預見的延遲的長期中斷可能會繼續導致延遲和向我們的客戶運送產品、增加成本和減少收入。

The company expressly disclaims any duty to provide updates to any forward-looking statements made in this call whether as a result of new information, future events or otherwise.

公司明確表示不承擔因新信息、未來事件或其他原因而更新本次電話會議中所做的任何前瞻性陳述的任何義務。

On this call, I will provide a brief overview and summary of the fourth quarter and fiscal year results for the period ended December 31, 2022. Management will then conduct a Q&A session. The 2022 fourth quarter are unaudited and the fiscal year financial results are audited and all results are reported using U.S. GAAP accounting. For the purposes of our call today, I'll review the financial results in U.S. dollars.

在這次電話會議上，我將簡要概述和總結截至 2022 年 12 月 31 日的第四季度和財年業績。管理層隨後將舉行問答環節。 2022 年第四季度未經審計，本財年財務業績經過審計，所有結果均使用美國公認會計原則進行報告。為了我們今天的電話會議，我將回顧一下以美元計算的財務結果。

We will begin with a review of the recent dynamics of the Chinese economy, the automobile industry and our market position. China's GDP growth was 4.8% in the first quarter of 2022, marking a historical soft period, which declined further to 4%, I'm sorry, 0.4% growth in the second quarter of 2022 before rebounding to 3.9% in the third quarter. However, GDP growth then slowed to 2.9% in the fourth quarter of 2022. Quarter-over-quarter, economic growth between the third and fourth quarters of 2022 was essentially flat. For fiscal year 2022, Chinese economic growth was a low 3%, down sharply from the 8.4% growth experienced in 2021.

我們將從回顧中國經濟、汽車行業和我們的市場地位的近期動態開始。中國 2022 年第一季度的 GDP 增長率為 4.8%，標誌著歷史疲軟期，進一步下降到 4%，對不起，2022 年第二季度增長 0.4%，然後在第三季度反彈到 3.9%。然而，GDP 增長隨後在 2022 年第四季度放緩至 2.9%。環比來看，2022 年第三季度和第四季度的經濟增長基本持平。 2022 財年，中國經濟增長率僅為 3%，遠低於 2021 年 8.4% 的增長率。

Total retail sales in China declined by 0.2%, partially due to the effects of COVID-19 lockdowns, and investment in real estate development declined by 10% in fiscal 2022. The COVID-19 outbreak worsened in 2022 first quarter resulting in lockdowns in several cities across China. The impact of COVID-19 affected the economy throughout the 2022 year, but lessened in the second half with the economy's better growth. Supply chain interruptions increased in early 2022, which hindered production, especially with critical computer chip shortages affecting automobile production, foreign exchange volatility and the economic outlook for key trading partners were concerns throughout 2022.

中國的零售總額下降了 0.2%，部分原因是受 COVID-19 封鎖的影響，2022 財年房地產開發投資下降了 10%。2022 年第一季度 COVID-19 疫情惡化，導致多個國家封鎖中國各地城市。 COVID-19 的影響影響了整個 2022 年的經濟，但在下半年隨著經濟的更好增長而減弱。供應鏈中斷在 2022 年初增加，這阻礙了生產，特別是嚴重的計算機芯片短缺影響了汽車生產，外匯波動和主要貿易夥伴的經濟前景在整個 2022 年都是令人擔憂的問題。

Going to the data from the Chinese Association of Automobile Manufacturers, CAAM, automobile sales increased by only 0.2% year-over-year in the first quarter of 2022, decreased by 13.3% year-over-year in the second quarter of 2022, increased by 29.4% year-over-year in the third quarter, and then declined by 3.3% year-over-year in the fourth quarter 2022. In 2022, total automobile sales grew by only 3.4% year-over-year. Passenger vehicle sales rose by 11.2% year-over-year, with sedans up 12.5%, NPVs down 11.3%, SUVs up 13.5% and cross-passenger vehicles 20.3% lower.

中國汽車工業協會數據顯示，2022年一季度汽車銷量同比僅增長0.2%，2022年二季度同比下降13.3%，同比增長第三季度同比增長29.4%，然後到2022年第四季度同比下降3.3%。2022年汽車總銷量同比僅增長3.4%。乘用車銷量同比增長 11.2%，其中轎車增長 12.5%，淨現值下降 11.3%，SUV 增長 13.5%，跨界乘用車下降 20.3%。

In 2022, commercial vehicle sales fell 31.9%, as bus sales were 19.9% lower and the much larger market for truck sales declined by 33.4%. Sales of new energy vehicles increased by 93.4% as new energy passenger vehicle sales rose by 94.3% and the much smaller new energy commercial vehicle sales were 78.9% higher. We introduced a proprietary EPS product in 2021 to further develop our own advanced driver systems, ADAS. This EPS product communicates with the vehicle's main data to create lane-keeping assist on automatic-parking assist, lane centering and traffic-jam assist functions. A number of auto manufacturers have already adopted our proprietary EPS primarily for their passenger vehicles.

2022 年，商用車銷量下降 31.9%，其中巴士銷量下降 19.9%，卡車銷量下降 33.4%。新能源汽車銷量增長93.4%，其中新能源乘用車銷量增長94.3%，規模較小的新能源商用車銷量增長78.9%。我們在 2021 年推出了專有的 EPS 產品，以進一步開發我們自己的高級驅動系統 ADAS。該EPS產品與車輛的主要數據進行通信，以創建自動泊車輔助、車道居中和交通擁堵輔助功能的車道保持輔助。許多汽車製造商已經主要將我們專有的 EPS 用於其乘用車。

In January 2022, we also signed with Scania AB to develop an ERCB steering systems for Scania's trucks and buses to better penetrate the commercial vehicle market in China. With our advanced driver systems L4 platform named AP04, our proprietary EPS system enables vehicles to execute Level 4 autonomous driving. This ERCB steering system has become the world's first mass-produced, fully electric intelligent power steering system for commercial vehicles. The technologies from our subsidiary in Sweden, Sentient AB promised to further enhance our EPS steering technology, especially for vehicle motion control for autonomous driving products, targeting both passenger and commercial vehicles. Sentient has already won installation contracts with global truck OEMs with their technologies. We have produced, shipped, and installed more than 3 million power steering sets, including EPS units to BYD Auto over a 20-year partnership. In late 2022, we expanded our strategic partnership with BYD, the largest Chinese EV producer for future autonomous driving products.

2022年1月，我們還與斯堪尼亞AB簽約，為斯堪尼亞的卡車和客車開發ERCB轉向系統，以更好地滲透中國商用車市場。憑藉我們名為 AP04 的高級驅動系統 L4 平台，我們專有的 EPS 系統使車輛能夠執行 4 級自動駕駛。該ERCB轉向系統成為全球首款量產的商用車全電動智能助力轉向系統。我們在瑞典的子公司 Sentient AB 的技術承諾進一步增強我們的 EPS 轉向技術，特別是針對自動駕駛產品的車輛運動控制，面向乘用車和商用車。 Sentient 已經憑藉其技術贏得了全球卡車原始設備製造商的安裝合同。在 20 年的合作夥伴關係中，我們已經為比亞迪汽車生產、運輸和安裝了超過 300 萬套動力轉向裝置，包括 EPS 裝置。 2022 年底，我們擴大了與中國最大的未來自動駕駛產品電動汽車生產商比亞迪的戰略合作夥伴關係。

We won design contracts with BYD for C-EPS, DP-EPS and R-EPS from BYD for all its series of products. We have introduced a new series of EPS products for BYD. Together with BYD engineers, CAAS' R&D engineers use computer-aided design and artificial intelligence to shorten the design cycle to 5 months for our DP-EPS products. We completed the DP-EPS integration into the chassis general assembly for BYD's model, Tang, in late 2022.

獲得比亞迪全系列產品C-EPS、DP-EPS、R-EPS設計合同。我們為比亞迪推出了一系列新的EPS產品。 CAAS 的研發工程師與比亞迪工程師一起，使用計算機輔助設計和人工智能將我們的 DP-EPS 產品的設計週期縮短至 5 個月。我們於 2022 年底完成了 DP-EPS 集成到比亞迪唐車型的底盤總裝中。

Now we develop new products and grow global market share, we are maintaining our financial strength as our free cash flow increased to $27.7 million compared with $19 million in 2021. For 2022, we repurchased 666,074 common shares under our repurchase buyback program. As the Chinese automobile market is recovering, our North American and Brazilian operations continue to expand. Our EPS products are gaining greater market acceptance and our NEV technologies are acquiring more capabilities. Our changing sales product mix is improving our margins.

現在我們開發新產品並擴大全球市場份額，我們正在保持我們的財務實力，因為我們的自由現金流從 2021 年的 1900 萬美元增加到 2770 萬美元。2022 年，我們根據回購回購計劃回購了 666,074 股普通股。隨著中國汽車市場的複蘇，我們的北美和巴西業務繼續擴張。我們的 EPS 產品正在獲得更大的市場認可，我們的 NEV 技術正在獲得更多功能。我們不斷變化的銷售產品組合正在提高我們的利潤率。

New COVID-19 policies have had a dramatic and positive impact on the Chinese economy. We vitalize in social and business activities and restoring supply chains. We expect the recovery of the economy who will strengthen over time, leading to greater automobile sales.

新的 COVID-19 政策對中國經濟產生了巨大而積極的影響。我們在社會和商業活動中註入活力，並恢復供應鏈。我們預計經濟復甦將隨著時間的推移而加強，從而帶來更大的汽車銷量。

Now let me review the financial results in the fourth quarter of 2022. Net sales decreased by 7.2% to $128.8 million compared to $138.8 million in the same quarter of 2021. The net sales decrease was mainly due to a change in the product mix and lower demand for passenger automobiles and commercial vehicles in the fourth quarter of 2022 compared to the fourth quarter of 2021. Gross profit increased by 26.9% to $25 million in the fourth quarter of 2022 compared to $19.7 million in the fourth quarter of 2021. Gross margin in the fourth quarter of 2022 was 19.4% compared to 14.2% in the fourth quarter of 2022, primarily due to a change in product mix.

現在讓我回顧一下 2022 年第四季度的財務業績。與 2021 年同期的 1.388 億美元相比，淨銷售額下降了 7.2% 至 1.288 億美元。淨銷售額下降的主要原因是產品組合的變化和較低的與 2021 年第四季度相比，2022 年第四季度對乘用車和商用車的需求。與 2021 年第四季度的 1970 萬美元相比，2022 年第四季度的毛利潤增長 26.9% 至 2500 萬美元。毛利率在2022 年第四季度為 19.4%，而 2022 年第四季度為 14.2%，這主要是由於產品結構的變化。

Selling expenses were $4.6 million in the fourth quarter of 2022 compared to $3.4 million in the fourth quarter of 2021. Selling expenses represented 3.6% of net sales in the fourth quarter of 2022 compared to 2.4% in the fourth quarter of 2021. General and administrative expenses were $10.8 million in the fourth quarter of 2022 compared to $7.6 million in the same period in 2021. G&A expenses represented 8.4% of net sales in the fourth quarter of 2022 compared to 5.5% of net sales in the fourth quarter of 2021, which was mainly due to the increase in provision of allowance for doubtful accounts. Research and development expenses, R&D, were $10.6 million in the fourth quarter of 2022 compared to $9.9 million in the fourth quarter of 2021. R&D expenses represented 8.2% of net sales in the fourth quarter of 2022 compared to 7.1% in the fourth quarter of 2021, mainly due to an increase in salaries and wages as a result of the increased R&D activity for new projects.

2022 年第四季度的銷售費用為 460 萬美元，而 2021 年第四季度為 340 萬美元。銷售費用佔 2022 年第四季度淨銷售額的 3.6%，而 2021 年第四季度為 2.4%。一般和行政管理2022 年第四季度的支出為 1080 萬美元，而 2021 年同期為 760 萬美元。G&A 支出佔 2022 年第四季度淨銷售額的 8.4%，而 2021 年第四季度占淨銷售額的 5.5%，這主要是呆賬準備金增加所致。 2022 年第四季度的研發費用 R&D 為 1060 萬美元，而 2021 年第四季度為 990 萬美元。研發費用佔 2022 年第四季度淨銷售額的 8.2%，而 2022 年第四季度為 7.1% 2021 年，主要是由於新項目的研發活動增加導致工資和工資增加。

Loss from operations was $2.6 million in the fourth quarter of 2022 compared to income from operations of $0.6 million in the fourth quarter of 2021. Interest expense was $0.3 million in the fourth quarter of 2022 compared to $0.5 million in the fourth quarter of 2021. Financial income was $1.4 million in the fourth quarter of 2022 due to exchange fluctuations of U.S. dollar to the Chinese RMB and the Brazilian real compared to financial expense of $1.5 million in the fourth quarter of 2021. Loss before income taxes and equity and earnings of affiliated companies was $2.7 million in the fourth quarter of 2022 compared to a loss of $0.4 million in the fourth quarter of 2021. Income tax benefit was $1.9 million in the fourth quarter of 2022 compared to an income tax expense of $0.7 million in the fourth quarter of 2021, mainly due to the loss before income tax expenses and equity and earnings of affiliated companies in the fourth quarter of 2022.

2022 年第四季度的運營虧損為 260 萬美元，而 2021 年第四季度的運營收入為 60 萬美元。2022 年第四季度的利息支出為 30 萬美元，而 2021 年第四季度為 50 萬美元。 財務由於美元兌人民幣和巴西雷亞爾的匯率波動，2022 年第四季度的收入為 140 萬美元，而 2021 年第四季度的財務費用為 150 萬美元。稅前虧損以及關聯公司的股權和收益2022 年第四季度為 270 萬美元，而 2021 年第四季度為虧損 40 萬美元。2022 年第四季度的所得稅收益為 190 萬美元，而 2021 年第四季度的所得稅費用為 70 萬美元，主要是2022年第四季度關聯公司所得稅費用及權益及收益前虧損所致。

Net income attributable to parent company's common shareholders was $4.3 million in the fourth quarter of 2022 compared to net income attributable to parent company's common shareholders of $5 million in the fourth quarter of 2021. Diluted income per share was $0.14 in the fourth quarter of 2022 compared to diluted income per share of $0.16 in the fourth quarter of 2021. The weighted average number of diluted common shares outstanding was 30,229,987 in the fourth quarter of 2022 compared to 30,853,822 in the fourth quarter of 2021.

2022年第四季度歸屬於母公司普通股股東的淨利潤為430萬美元，而2021年第四季度歸屬於母公司普通股股東的淨利潤為500萬美元。2022年第四季度攤薄後每股收益為0.14美元，相比之下2021 年第四季度攤薄後每股收益為 0.16 美元。2022 年第四季度攤薄後發行在外的普通股加權平均數為 30,229,987 股，而 2021 年第四季度為 30,853,822 股。

Now we'll review the full year 2022 highlights. Net sales increased by 6.3% year-over-year to $529.6 million in 2022 compared to $498 million in 2021. This increase was mainly due to higher sales of passenger vehicles in China with sales to Chery Automobile up 54.5% year-over-year and total sales of electric power steering EPS systems increased by 35.6% year-over-year. EPS sales represented 29.5% of total revenue in 2022 compared to 23.2% in 2021. Net sales of vehicle steering system to the company's North American customers was approximately the same in 2022, but Brazil Henglong's net sales grew by 54.1% year-over-year to $39.3 million.

現在，我們將回顧 2022 年全年的亮點。淨銷售額同比增長 6.3% 至 2022 年的 5.296 億美元，而 2021 年為 4.98 億美元。這一增長主要是由於中國乘用車銷量增加，奇瑞汽車的銷量同比增長 54.5%，電動助力轉向EPS系統總銷量同比增長35.6%。 EPS 銷售額佔 2022 年總收入的 29.5%，而 2021 年為 23.2%。2022 年公司北美客戶的車輛轉向系統淨銷售額大致相同，但巴西恆隆的淨銷售額同比增長 54.1%至 3930 萬美元。

Gross profit in 2022 increased by 15.7% year-over-year to $83.4 million compared to $72.1 million in 2021. The gross margin increased to 15.7% from 14.5% in 2021, mainly due to changes in the product mix. Gain on other sales in 2022 decreased to $3.7 million compared to $4.4 million in 2021. Selling expenses declined by 7.7% year-over-year to $16.9 million in 2022 compared to $18.3 million in 2021, mainly due to lower transportation expenses. Selling expenses represented 3.2% of net sales in 2022 compared to 3.7% in 2021.

2022 年的毛利潤同比增長 15.7% 至 8340 萬美元，而 2021 年為 7210 萬美元。毛利率從 2021 年的 14.5% 增長至 15.7%，這主要是由於產品結構的變化。 2022 年其他銷售收益從 2021 年的 440 萬美元下降至 370 萬美元。銷售費用同比下降 7.7% 至 2022 年的 1690 萬美元，而 2021 年為 1830 萬美元，這主要是由於運輸費用下降。 2022 年銷售費用占淨銷售額的 3.2%，而 2021 年為 3.7%。

G&A expenses increased by 7% year-over-year to $26.1 million in 2022 compared to $24.4 million in 2021. G&A expenses represented 4.9% of net sales in 2022 compared to 4.9% of net sales in 2021. R&D expenses were $36.1 million in 2022 compared to $28.2 million in 2021. The increase was primarily due to higher investment in EPS products and other new products. R&D expenses were 6.8% of net sales in 2022 compared to 5.7% of net sales in 2021.

2022 年 G&A 費用同比增長 7% 至 2610 萬美元，而 2021 年為 2440 萬美元。G&A 費用佔 2022 年淨銷售額的 4.9%，而 2021 年占淨銷售額的 4.9%。2022 年研發費用為 3610 萬美元與 2021 年的 2820 萬美元相比。增加的主要原因是對 EPS 產品和其他新產品的投資增加。 2022 年研發費用占淨銷售額的 6.8%，而 2021 年占淨銷售額的 5.7%。

Operating income increased by 45.5% year-over-year to $8 million in 2022 compared to $5.5 million in 2021. The increase in operating income was mainly due to higher gross profit. Interest expense was $1.5 million in 2022, consistent with the $1.4 million in 2021. Net financial income was $10.8 million in 2022 compared to net financial expense of $2.4 million in 2021, primarily due to an increase in foreign exchange gains as U.S. dollar fluctuated against the Chinese RMB and Brazilian real.

營業收入同比增長 45.5% 至 2022 年的 800 萬美元，而 2021 年為 550 萬美元。營業收入的增長主要是由於毛利潤增加。 2022 年的利息支出為 150 萬美元，與 2021 年的 140 萬美元一致。2022 年的淨財務收入為 1080 萬美元，而 2021 年的淨財務費用為 240 萬美元，這主要是由於美元兌美元匯率波動導致外匯收益增加中國人民幣和巴西雷亞爾。

Income before income tax expenses and equity and earnings of the affiliated companies was $23 million compared to $8.4 million in fiscal year 2021. The change is primarily due to higher operating income and net financial income in 2022. Income tax expense was $3.1 million in 2022 compared to $4 million in 2021.

關聯公司所得稅費用和股權及收益前的收入為 2300 萬美元，而 2021 財年為 840 萬美元。這一變化主要是由於 2022 年營業收入和淨財務收入增加。與 2022 年相比，所得稅費用為 310 萬美元到 2021 年達到 400 萬美元。

Net income attributable to parent company's common shareholders was $21.2 million in 2022 compared to net income attributable to parent company's common shareholders of $11.1 million in 2021. Diluted net income per share increased by 91.7% year-over-year to $0.69 in 2022 compared to $0.36 in 2021. The weighted average number of diluted common shares outstanding was 30,641,274 in 2022 compared to 30,855,431 common shares in 2021.

2022 年歸屬於母公司普通股股東的淨利潤為 2120 萬美元，而 2021 年歸屬於母公司普通股股東的淨利潤為 1110 萬美元。稀釋後每股淨利潤同比增長 91.7% 至 0.69 美元，2022 年為 0.36 美元2021 年已發行稀釋普通股的加權平均數在 2022 年為 30,641,274 股，而 2021 年為 30,855,431 股普通股。

Next, we'll go over a few balance sheet items. As of December 31, 2022, total cash and equivalents, pledged cash and short-term investments were $171.8 million. Total accounts receivable including notes receivable were $224.3 million. Accounts payable including notes payable were $235.1 million and short-term bank loans were $45.7 million. Total parent company stockholders' equity was $311.7 million as of December 31, 2022 compared to $321 million as of December 31, 2021.

接下來，我們將討論一些資產負債表項目。截至 2022 年 12 月 31 日，現金及等價物、質押現金和短期投資總額為 1.718 億美元。包括應收票據在內的應收賬款總額為 2.243 億美元。包括應付票據在內的應付賬款為 2.351 億美元，短期銀行貸款為 4570 萬美元。截至 2022 年 12 月 31 日，母公司股東權益總額為 3.117 億美元，截至 2021 年 12 月 31 日為 3.21 億美元。

Cash flow from operating activities was $48 million in 2022 compared to $28.3 million in 2021. Cash paid to acquire property plant and equipment and land use rights was $20.3 million in 2022 compared to $9.3 million in 2021.

2022 年經營活動產生的現金流為 4800 萬美元，而 2021 年為 2830 萬美元。2022 年為收購物業廠房和設備以及土地使用權支付的現金為 2030 萬美元，而 2021 年為 930 萬美元。

Business outlook. Management has provided revenue guidance for the year 2023 to $560 million. This target is based on the company's current views on operating and marketing conditions, which are subject to change.

商業前景。管理層已將 2023 年的收入指引定為 5.6 億美元。這一目標是基於公司目前對經營和營銷狀況的看法，這些看法可能會發生變化。

With that, operator, we are now ready to begin the Q&A session.

有了這個，接線員，我們現在準備開始問答環節。

(Operator Instructions) Your first question is coming from Bill Gregozeski of Greenridge Global.

（操作員說明）您的第一個問題來自 Greenridge Global 的 Bill Gregozeski。

I have 4 questions for you today. First off, gross margins in the fourth quarter were much higher than expected. This is a sustainable long-term margin figure based on the higher EPS contribution?

我今天有 4 個問題要問你。首先，第四季度的毛利率遠高於預期。這是基於較高的 EPS 貢獻的可持續長期利潤率數據？

(foreign language)

（外語）

[Interpreted] So full year 2022 gross margin is 16%. But our fourth quarter -- as you saw, our fourth quarter gross margin was 19%. It is mainly attributable to the electric power steering volume increase. And we also foresee 2023, our EPS electric power steering product volume will continue to increase. And that said, that will further propel the gross margin expansion. As you know, the EPS product in the past, the gross margin is somewhat in the 15% range. And now with the higher volume, we believe that economy scale will give us a better margin for EPS going forward. As a result, the blended gross margin will also continue to climb in 2023.

[解讀]所以2022年全年毛利率為16%。但是我們的第四季度——如您所見，我們第四季度的毛利率為 19%。主要歸因於電動助力轉向量的增加。而且我們也預見到2023年，我們的EPS電動助力轉向產品量會繼續增加。也就是說，這將進一步推動毛利率的擴張。如您所知，過去的EPS產品，毛利率在15%左右。現在隨著銷量的增加，我們相信經濟規模將為我們未來的每股收益帶來更好的利潤。因此，混合毛利率也將在 2023 年繼續攀升。

Okay. And then what are your expectations for hydraulic and EPS sales for 2023 and 2024?

好的。那麼您對 2023 年和 2024 年液壓和 EPS 銷售的預期是什麼？

(foreign language)

（外語）

Expectation for volume?

對體積的期望？

Yes.

是的。

(foreign language)

（外語）

[Interpreted] Okay. So let's look at 2023 first. We anticipate EPS sales volume will continue to climb another 30% increase in 2023. As a result, EPS sales will account for about 36% of total sales in 2023 year.

[解釋] 好的。因此，讓我們先看看 2023 年。我們預計 EPS 銷量將在 2023 年繼續攀升 30%。因此，EPS 銷量將佔 2023 年總銷量的 36% 左右。

So in 2024, we see our EPS sales volume will reach -- will surpass 40% of total volume.

因此，到 2024 年，我們看到我們的 EPS 銷量將達到——將超過總銷量的 40%。

Okay. Awesome. And then third, R&D expenses increased $8 million in 2022 compared to 2021. How much R&D spending will there be in 2023? And what is going to be the focus of that spending?

好的。驚人的。第三，與 2021 年相比，2022 年的研發費用增加了 800 萬美元。2023 年的研發費用會有多少？這筆支出的重點是什麼？

(foreign language)

（外語）

[Interpreted] Our EPS research -- I mean our R&D research is mainly focused on the EPS product. And that's including the DP-EPS and R-EPS. We also had some R&D into the spend going to R -- i-RCB and the ERCB product. And last piece, we are putting a lot of effort in R&D steering by wire. So what we call SBW product. And so all these together, we're looking at $20 million, $23 million R&D expenses accounts for approximately 6% to 6.5% of total revenue.

[解讀]我們的EPS研究——我的意思是我們的研發研究主要集中在EPS產品上。這包括 DP-EPS 和 R-EPS。我們還對用於 R-i-RCB 和 ERCB 產品的支出進行了一些研發。最後一點，我們在研發線控轉向方面投入了大量精力。所以我們稱之為 SBW 產品。因此，所有這些加起來，我們正在尋找 2000 萬美元，2300 萬美元的研發費用約佔總收入的 6% 至 6.5%。

Okay. And then last question here. Can you provide an update on how the BYD order is going? And whether there are any updates related to Sentient and the Volvo order?

好的。然後是最後一個問題。您能否提供有關比亞迪訂單進展情況的最新信息？ Sentient和沃爾沃訂單有沒有更新？

(foreign language)

（外語）

[Interpreted] So yes, BYD has been a long-term customer and now increasingly become our -- one of our top priorities. In 2022, we grew with BYD significantly, and we expect the growth will continue in 2023. We -- last year -- towards the end of last year, if you recall, a long-term strategic partnership with them. Through that comprehensive partnership, we are now entering into all series of models of BYD products. And so in 2022, we sold about 400,000 to 500,000 units, and we're looking to double in 2023.

[解讀]所以是的，比亞迪一直是我們的長期客戶，現在越來越成為我們的首要任務之一。 2022 年，我們與比亞迪實現了顯著增長，我們預計這種增長將在 2023 年繼續。如果你還記得的話，我們——去年——接近去年年底，與他們建立了長期戰略合作夥伴關係。通過全面的合作夥伴關係，我們現在正在進入比亞迪產品全系列車型。因此，在 2022 年，我們售出了大約 400,000 到 500,000 台，我們希望在 2023 年翻一番。

Okay. And then were there any updates related to the Sentient and Volvo order?

好的。然後有沒有與 Sentient 和沃爾沃訂單相關的更新？

(foreign language)

（外語）

[Interpreted] Yes, our subsidiary in Sweden, the autonomous driving arm are doing pretty well. We booked some revenue, a moderate revenue in 2022, and we're looking to increase the revenue -- they are looking to increase the revenue in the second half of 2023. There's large batch order that will be expected. In the meantime -- that's with the European customer. In the meantime, we are deep in our partnership with BYD. Especially, we are looking into some -- they are looking into some of the autonomous driving features we can provide. So looking forward to work with BYD to materialize those autonomous functions into their new models.

【解讀】是的，我們在瑞典的子公司，自動駕駛臂做得很好。我們預訂了一些收入，2022 年收入適中，我們希望增加收入——他們希望在 2023 年下半年增加收入。預計會有大批量訂單。與此同時——那是與歐洲客戶的關係。與此同時，我們與比亞迪的合作關係也很深入。特別是，我們正在研究一些——他們正在研究我們可以提供的一些自動駕駛功能。因此期待與比亞迪合作，將這些自主功能具體化到他們的新車型中。

(Operator Instructions) It appears we have no further questions in the queue. I'm going to hand back over to Kevin for any closing remarks.

（操作員說明）看來隊列中沒有其他問題了。我將把任何結束語交還給凱文。

We want to thank everyone for joining us today in our conference call. We wish you to be safe, and we look forward to speaking with you in the future. Thank you.

我們要感謝大家今天加入我們的電話會議。我們希望你安全，我們期待著在未來與你交談。謝謝。

Thank you, everybody. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

謝謝大家。這確實結束了今天的電話會議。此時您可以斷開電話線，度過美好的一天。感謝您的參與。

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[此記錄中標記為 [已翻譯] 的部分由現場通話中的口譯員說出。]