Financial Data and Key Metrics Changes - Net sales increased by 26.8% year-over-year to $137.2 million compared to $108 million in Q3 2021 [13] - Gross profit grew by 24.4% year-over-year to $20.9 million, while gross margin slightly declined to 15.2% from 15.5% in Q3 2021 [10][14] - Income per share was $0.24 in Q3 2022, compared to a loss per share of $0.01 in Q3 2021 [11][18] - Net cash provided by operating activities was $31.7 million in the first 9 months of 2022, compared to a net cash used of $5.9 million in the same period of 2021 [21] Business Line Data and Key Metrics Changes - Sales of traditional hydraulic products remained strong, with a 50.2% year-over-year increase from the Wuhu subsidiary [9] - Electric power steering (EPS) sales rose by 93.7% year-over-year, contributing $44.8 million or 32.7% of net sales [9][13] - Net product sales in North America decreased by 4.8% to $29.5 million due to changes in product mix [13] Market Data and Key Metrics Changes - Total vehicle sales in China increased by 24.9% year-over-year in Q3 2022, with passenger vehicles up 36.6% and commercial vehicles down 10.6% [7][8] - For the first 9 months of 2022, CAAM reported a 4.4% year-over-year increase in automobile sales, with passenger vehicle sales rising by 14.2% [8] Company Strategy and Development Direction - The company is focusing on developing its ERCB systems for autonomous driving and enhancing NEV steering technology through its subsidiary Sentient AB [11][12] - Management has increased its revenue guidance for the full year 2022 to $540 million based on current operating and market conditions [22] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth of EPS sales, projecting around 50% year-over-year growth for 2023 [24][26] - The company anticipates margin recovery in the upcoming year due to increased EPS product volume and recovery in the commercial vehicle market [26] Other Important Information - As of September 30, 2022, cash and cash equivalents totaled $131.7 million, with working capital of $153.4 million [12][20] - The company repurchased 382,418 common shares at an average cost of $3.59 under its buyback program [12] Q&A Session Summary Question: Why were sales to the U.S. the lowest in about 2 years? - Management indicated that the decrease was primarily due to a change in product mix, selling more lower-priced products, and they are working on new customer opportunities in North America [22][23] Question: What is the outlook for EPS sales growth in Q4 and 2023? - EPS sales have shown strong growth, with $120 million booked in the first 9 months of 2022, and management expects continued growth into Q4 and around 50% growth year-over-year in 2023 [24][25] Question: Will margins expand in the future? - Management confirmed that margins are expected to improve as EPS volume increases, benefiting overall gross margins [25][26] Question: Update on Sentient and investment status? - Management reported positive progress with Sentient, including a sizable contract with Mobil and plans for mass production by mid-2023 [27][28]

[Part I — Financial Information](index=4&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This part presents the company's unaudited financial statements, management's analysis, and market risk disclosures [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements show significant net income growth driven by higher sales and favorable foreign exchange movements [Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Unaudited%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported a significant turnaround in Q3 2022 net income, driven by a 26.8% increase in net product sales Key Operating Results (Three Months Ended Sep 30) | Financial Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net product sales | $137,207 | $108,231 | | Gross profit | $20,918 | $16,792 | | Income from operations | $4,887 | $591 | | Net income/(loss) attributable to parent | $7,470 | $(317) | | Diluted EPS | $0.24 | $(0.01) | Key Operating Results (Nine Months Ended Sep 30) | Financial Metric | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net product sales | $400,764 | $359,176 | | Gross profit | $58,363 | $52,369 | | Income from operations | $10,549 | $4,870 | | Net income attributable to parent | $16,839 | $6,089 | | Diluted EPS | $0.55 | $0.20 | [Condensed Unaudited Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Unaudited%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased as of September 30, 2022, compared to the end of the previous fiscal year Key Balance Sheet Items (in thousands) | Balance Sheet Item | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $100,712 | $131,695 | | Total current assets | $488,180 | $501,380 | | Total assets | $674,893 | $716,762 | | **Liabilities & Equity** | | | | Total current liabilities | $334,775 | $351,816 | | Total liabilities | $357,252 | $379,321 | | Total stockholders' equity | $317,066 | $336,888 | [Condensed Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities improved significantly, while investing activities saw increased cash usage for the nine-month period Summary of Cash Flows (in thousands) | Cash Flow Activity (Nine Months Ended) | Sep 30, 2022 | Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $31,677 | $(5,867) | | Net cash used in investing activities | $(42,662) | $(2,188) | | Net cash used in financing activities | $(546) | $(6,020) | | Net decrease in cash, cash equivalents and pledged cash | $(27,754) | $(13,060) | [Notes to Condensed Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail customer concentration, a significant long-term investment in Sentient AB, and segment sales performance - In Q3 2022, the company's five largest customers accounted for **41.9%** of consolidated net product sales, with one single customer representing **17.8%** of sales[41](index=41&type=chunk) - The company completed a transaction in March 2022 to purchase **40%** of Sentient AB's share capital for approximately **$24.5 million**, with **$21.62 million** paid as of September 30, 2022[48](index=48&type=chunk) Net Product Sales by Segment (Q3, in thousands) | Segment | Net Product Sales (Q3 2022) | Net Product Sales (Q3 2021) | | :--- | :--- | :--- | | Henglong | $62,590 | $39,937 | | Jiulong | $16,986 | $17,127 | | Hubei Henglong | $29,525 | $31,023 | | Henglong KYB | $36,995 | $19,095 | | Brazil Henglong | $11,510 | $7,576 | | **Total** | **$137,207** | **$108,231** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong performance to increased electric power steering (EPS) product sales and favorable foreign exchange gains [Results of Operations - Three Months Ended September 30, 2022 and 2021](index=34&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030%2C%202022%20and%202021) Q3 2022 net sales rose 26.8% driven by EPS products, while net income was boosted by significant foreign exchange gains - Net product sales increased by **$29.0 million (26.8%)** YoY in Q3 2022, primarily due to increased sales of electric power steering (EPS)[125](index=125&type=chunk) - Sales of EPS products grew by **$15.4 million (52.4%)** and accounted for **32.6%** of net sales in Q3 2022, up from 27.2% in Q3 2021[125](index=125&type=chunk) - Research and development expenses increased by **$3.8 million (65.4%)** due to increased R&D activities for new projects[143](index=143&type=chunk) - Net financial income was **$4.8 million**, compared to a net expense of $0.8 million in the prior year, primarily due to foreign exchange gains[146](index=146&type=chunk) [Results of Operations - Nine Months Ended September 30, 2022 and 2021](index=39&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030%2C%202022%20and%202021) Net sales grew 11.6% over nine months, with net income increasing 176.5% due to EPS sales and foreign exchange gains - Net product sales for the nine-month period increased by **$41.6 million (11.6%)** YoY, with EPS sales growing by **$40.8 million (52.8%)**[151](index=151&type=chunk) - Gross margin for the nine-month period was stable at **14.6%**, consistent with the same period in 2021[167](index=167&type=chunk) - Net income attributable to parent company's common shareholders increased by **176.5% to $16.8 million** for the nine months ended September 30, 2022[172](index=172&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained solid liquidity with increased working capital and significantly improved operating cash flow - As of September 30, 2022, the company had working capital of **$153.5 million**, an increase of **2.6%** from December 31, 2021[173](index=173&type=chunk) - The company has comprehensive credit facilities totaling **$143.7 million**, with **$64.7 million** used as of September 30, 2022[179](index=179&type=chunk)[180](index=180&type=chunk) - Net cash provided by operating activities was **$31.7 million** for the first nine months of 2022, a significant improvement from a $5.9 million use of cash in the prior-year period[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported since the last annual report - No material changes to market risk disclosures were reported for the period[197](index=197&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of September 30, 2022 - The company's management concluded that disclosure controls and procedures were **effective** as of September 30, 2022[198](index=198&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the third quarter of 2022[199](index=199&type=chunk) [Part II — Other Information](index=53&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This part details legal proceedings, risk factors, share repurchases, and filed exhibits [Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any pending or threatened legal proceedings - The company is **not involved** in any pending or threatened legal proceedings[200](index=200&type=chunk) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Key risks include Chinese government oversight, potential new overseas listing regulations, and evolving data security requirements - The business is subject to **significant oversight and discretion from the Chinese government**, which may intervene in operations at any time[201](index=201&type=chunk) - The company may be subject to **new filing requirements** with the China Securities Regulatory Commission (CSRC) for future overseas offerings[206](index=206&type=chunk)[207](index=207&type=chunk) - New **cybersecurity and data transfer regulations** from the Cyberspace Administration of China (CAC) could impose additional compliance burdens[216](index=216&type=chunk)[220](index=220&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 382,418 shares in Q3 2022 under its approved share repurchase program - On March 29, 2022, the Board approved a share repurchase program for up to **$5.0 million** of common stock through March 30, 2023[227](index=227&type=chunk) Share Repurchase Activity (Q3 2022) | Period (2022) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July | 85,633 | $2.8705 | | August | 128,525 | $3.4589 | | September | 168,260 | $4.0479 | | **Total Q3** | **382,418** | **$3.5863** | [Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section indexes the exhibits filed with the Form 10-Q, including CEO and CFO certifications

Financial Data and Key Metrics Changes - The company's net sales increased by 5.5% year-over-year to $127.2 million in Q2 2022 compared to $120.6 million in Q2 2021 [12] - Gross profit rose by 43.7% to $22.7 million in Q2 2022, with a gross margin of 17.9%, up from 13.1% in Q2 2021 [13][9] - Net income attributable to common shareholders was $9.4 million in Q2 2022, compared to $3.2 million in Q2 2021, with diluted earnings per share increasing to $0.31 from $0.10 [17] Business Line Data and Key Metrics Changes - Net sales of electric power steering (EPS) products rose by 39.7% to $32.4 million, representing 25.5% of total net sales in Q2 2022, compared to 19.2% in Q2 2021 [13] - Traditional steering products and parts saw a decrease in net sales by 2.6% to $94.8 million in Q2 2022 [13] - The Commercial Vehicle Products division reflected a decline in sales, consistent with the overall commercial vehicle sector's performance [8] Market Data and Key Metrics Changes - The Chinese automobile market experienced a 13.3% year-over-year decline in mobile sales in Q2 2022, with passenger vehicle sales down by 2.2% and commercial vehicle sales down by 50.1% [7] - For the first six months of 2022, overall automobile sales in China declined by 6.6% year-over-year, while passenger vehicle sales increased by 3.4% [7] Company Strategy and Development Direction - The company signed an agreement with Scania AB to develop ERCB steering systems for trucks and buses, aiming to expand its technology in the commercial vehicle market [10] - The focus on electric power steering products and advanced driver assistance systems indicates a strategic shift towards enhancing capabilities in autonomous driving technologies [10] Management Comments on Operating Environment and Future Outlook - Management noted a slight GDP growth of 0.4% in China for Q2 2022, with challenges from COVID-19 impacting supply chains and market conditions [6] - The company expressed optimism about the recovery of the Chinese automobile market, driven by pent-up demand and favorable government policies [11] - Revenue guidance for the full year 2022 has been increased, reflecting a positive outlook despite ongoing economic challenges [19] Other Important Information - As of June 30, 2022, the company had cash and equivalents of $143.8 million and working capital of $150.1 million [10] - The company has initiated a share repurchase program, utilizing up to $5 million for buying back outstanding shares [10] Q&A Session Summary Question: What is the margin level you're expecting going forward? - Management indicated that the gross margin reached 17.9% in Q2 2022, the highest in five years, driven by increased efficiency and higher selling prices for EPS products. They expect further improvement in EPS gross margins to 16% to 17% in the coming quarters [20][22] Question: Have you continued repurchasing shares in the current quarter? - Management confirmed that over 200,000 shares have been repurchased since the announcement and will continue to repurchase shares in the overall market [24]

Financial Data and Key Metrics Changes - Net sales increased by 4.7% year-over-year to $136.4 million in Q1 2022 compared to $130.3 million in Q1 2021 [12] - Gross margin declined to 10.8% from 15.1% in Q1 2021, primarily due to higher material costs and international freight charges [9][13] - Net loss attributable to parent company's common shareholders was $0.06 million in Q1 2022, compared to net income of $3.2 million in Q1 2021 [16] - Diluted loss per share was zero in Q1 2022, compared to net income per share of $0.10 in Q1 2021 [17] Business Line Data and Key Metrics Changes - Net sales of traditional steering products decreased by 9.7% to $95.4 million in Q1 2022 compared to $105.6 million in Q1 2021 [13] - Net sales of electric power steering (EPS) products rose by 66% to $41 million from $24.7 million in Q1 2021, accounting for 30.1% of total net sales [13] - Research and development expenses increased by 20.9% year-over-year to $8.1 million, representing 5.9% of net sales in Q1 2022 [14] Market Data and Key Metrics Changes - China's GDP growth was 4.8% in Q1 2022, historically low but above expectations [7] - Passenger vehicle sales rose 9% year-over-year, while commercial vehicle sales declined by 31.7% in Q1 2022 [8] - Retail spending was weak, and unemployment rose to 5.8% in March 2022 [7] Company Strategy and Development Direction - The company is focusing on enhancing its EPS product line and developing new EPS products to expand market penetration [9] - A new ERCB steering system for SCANIA's trucks and buses is being developed, aimed at the commercial vehicle space [10] - The company has initiated a share repurchase program of up to $5 million over the next 12 months [11] Management Comments on Operating Environment and Future Outlook - Management has reduced revenue guidance for the full year 2022 to $490 million from $510 million due to the economic impact of COVID-19 and foreign exchange volatility [18] - The lockdowns in China significantly impacted the auto industry, with passenger vehicle sales down 40% in April 2022 compared to April 2021 [19] - Management expects R&D expenses to be slightly higher in 2023 compared to 2022, focusing on electric power steering and autonomous driving technologies [24] Other Important Information - The company had cash and cash equivalents of $109.4 million as of March 31, 2022 [11] - Total accounts receivable were $222.4 million, and total liabilities were $227.7 million [17] Q&A Session Summary Question: Impact of lockdowns in China - The lockdowns had a significant impact in April, with passenger vehicle sales down 40% compared to April last year, leading to a downward adjustment in annual guidance [19] Question: Gross margin concerns - Gross margin was affected by weak sales in the commercial vehicle sector, higher shipping costs, and foreign exchange impacts [20][21] Question: R&D spending - R&D spending in Q1 was $8.1 million, with an expected total of $30 million for the fiscal year, focusing on EPS and autonomous driving technologies [24] Question: Share repurchase timing - The company plans to start share repurchases shortly after finalizing reporting, expected to take about 10 days [25]

Financial Performance - Net product sales for Q1 2022 were $136.396 million, an increase of 4.6% from $130.341 million in Q1 2021, representing a change of $6.055 million[106]. - Cost of products sold in Q1 2022 was $121.662 million, up 10.0% from $110.593 million in Q1 2021, reflecting an increase of $11.069 million[106]. - Net income attributable to the parent company's common shareholders was a loss of $59, compared to a profit of $3.206 million in Q1 2021, marking a decline of 101.8%[106]. - Other income increased significantly by 104.2% to $3.519 million in Q1 2022, compared to $1.723 million in Q1 2021[106]. - The company experienced a 29.3% decrease in gain on other sales, which fell to $931 thousand from $1.316 million year-over-year[106]. - Selling expenses decreased by 23.1% to $4.312 million in Q1 2022, down from $5.609 million in Q1 2021, indicating improved cost management[106]. - Gross margin for the three months ended March 31, 2022, was 10.8%, a decrease of 4.3% from 15.1% in the same period of 2021, attributed to changes in product mix[126]. - The company reported a net loss attributable to parent company's common shareholders of $0.1 million for the three months ended March 31, 2022, compared to a net income of $3.2 million for the same period in 2021[128]. Research and Development - Research and development expenses rose to $8.137 million in Q1 2022, a 21.8% increase from $6.680 million in Q1 2021, indicating a focus on innovation[106]. - Research and development expenses increased by $1.4 million or 20.9% to $8.1 million, primarily due to increased expenditures on EPS product development[126]. Sales and Market Position - Net product sales for the three months ended March 31, 2022, were $136.4 million, an increase of $6.1 million or 4.7% compared to $130.3 million for the same period in 2021[109]. - Net sales of electric power steering (EPS) reached $41.0 million, a significant increase of $16.3 million or 66.0% from $24.7 million in the same period last year, accounting for 30.1% of total net sales[109]. - The increase in net product sales was driven by higher sales volume in foreign markets ($2.2 million), increased average selling prices ($0.5 million), and RMB appreciation against the U.S. dollar ($3.4 million)[110]. - Henglong's net product sales increased to $62.0 million, up $12.9 million or 26.3% from $49.1 million, primarily due to increased sales volume[112]. - Jiulong's net product sales decreased to $17.7 million, down $16.0 million or 47.5%, mainly due to a decrease in sales volume[113]. - The company has business relationships with over 60 vehicle manufacturers, including major players like GM and Ford, enhancing its market position[96]. Cash Flow and Financing - As of March 31, 2022, the company had cash and cash equivalents of $124.0 million, a decrease of $9.5 million or 7.1% from $133.5 million as of December 31, 2021[129]. - Net cash used in operating activities for Q1 2022 was $4.3 million, an increase of $3.5 million compared to Q1 2021[147]. - Net cash used in investing activities for Q1 2022 was $45.6 million, an increase of $39.8 million compared to Q1 2021[148]. - Net cash used in financing activities for Q1 2022 was $0.7 million, a decrease from net cash provided of $1.4 million in Q1 2021[149]. - The company expects a reduction in the value of mortgages securing bank loans by approximately $16.7 million over the next 12 months[132]. - The company may need to provide additional mortgages of $16.7 million to maintain the same amount of bank loans in the future[132]. - The company can still obtain a reduced line of credit with a reduction of $16.0 million if it cannot provide additional mortgages[132]. - The company has complied with financial covenants as of March 31, 2022[145]. - The company’s bank loan terms range from 6 to 12 months, with various banks providing working capital loans[138]. - Total working capital payable on due dates amounted to $86,759 thousand[150]. - Working capital due in June 2022 was $18,829 thousand, the highest in the reported period[150]. - Working capital due in April 2022 was $12,310 thousand, showing a decrease in subsequent months[150]. Employment and Operations - As of March 31, 2022, the company employed approximately 4,051 individuals, focusing on design, development, manufacturing, and sales[97]. - The company aims to improve overall margins and long-term operating profitability through operational enhancements and business structure improvements[97]. - The company had no significant off-balance sheet arrangements as of March 31, 2022[151]. - There were no material changes to market risk disclosures compared to the previous annual report[152].

China Automotive Systems, Inc. (NASDAQ:CAAS) Q4 2021 Earnings Conference Call March 30, 2022 8:00 AM ET Company Participants Kevin Theiss - Investor Relations Conference Call Participants William Gregozeski - Greenridge Global Operator Good day, ladies and gentlemen, and welcome to the China Automotive Systems' Fourth Quarter and Fiscal Year 2021 Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentati ...

China Automotive Systems, Inc. (NASDAQ:CAAS) Q3 2021 Earnings Conference Call November 12, 2021 8:00 AM ET Company Participants Kevin Theiss - IR Jie Li - CFO Conference Call Participants William Gregozeski - Greenridge Global Operator Good day ladies and gentlemen, and welcome to the China Automotive Systems Third Quarter 2021 Earnings Conference Call. At this time all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is n ...