Summary of the Conference Call for HeMai Co., Ltd. Industry Overview - The company operates in the photovoltaic and energy storage industry, facing challenges due to a downturn in the solar market and increased competition [2][5][30]. Key Financial Metrics - Revenue for the first three quarters reached 1.3 billion CNY, with equipment sales below 1 billion CNY [2][5]. - Micro-inverter revenue declined approximately 30% year-on-year, with expectations of a similar decline for the full year [2][5]. - Gross margin maintained at 47%-48% despite revenue challenges [2][5]. - The company reported a net loss of 75 million CNY in Q3, with a total net loss of 59 million CNY for the year-to-date [4]. Business Segments - **Energy Storage Business**: - Revenue from household energy storage approached 100 million CNY in the first three quarters, expected to reach 150 million CNY for the full year [2][6]. - Commercial and large-scale storage revenue was around 200 million CNY, with expectations of at least 300 million CNY in Q4 [2][6]. - **Micro-inverter Business**: - Expected revenue of approximately 800 million CNY for the year, down 30%-40% year-on-year [8]. Research and Development - R&D investment reached 260 million CNY in the first nine months, with sales expenses increasing by 30%-50% [7]. - The company aims to expand market share in the power electronics sector by 2026 [7]. Market Strategy - Plans to increase overseas market share for large-scale storage to 30%-40% next year, focusing on Europe and Latin America [11][21]. - The company believes in a dual approach of developing both micro-inverters and energy storage systems to address market competition [3][17]. Future Outlook - The company anticipates significant growth in energy storage, projecting a 3-5 times increase in household storage and a 5 times increase in commercial storage revenue next year [8][20]. - Overall revenue for 2026 is expected to exceed 2 billion CNY, driven by energy storage growth [16][29]. Regional Market Insights - The European market is seen as a key area for growth, with a focus on energy storage due to its mature market conditions [21][25]. - The company is also exploring opportunities in the Asia-Pacific region, particularly in countries like Australia and Japan [24]. Challenges and Strategic Response - The main challenge is building capabilities to achieve performance breakthroughs in a competitive landscape [30]. - The company is committed to maintaining strategic focus and investing in R&D to enhance its market position [30]. Conclusion - HeMai Co., Ltd. is navigating a challenging market environment with a strategic focus on energy storage and innovation, aiming for substantial growth in the coming years while addressing competitive pressures and market dynamics [2][30].

Financial Data and Key Metrics Changes - Revenue for the second quarter was $613 million, reflecting a 10% increase year-over-year and a 6% organic growth, with the Dortmund acquisition contributing 2% to sales growth and foreign exchange providing a 1% tailwind [19][20] - Adjusted EBITDA margin improved to 21.4%, up 280 basis points, driven by strong sales growth and operational performance [19][20] - Adjusted diluted earnings per share (EPS) was $2.85, up 45% compared to the previous year, exceeding the high end of prior guidance [20] Business Line Data and Key Metrics Changes - **Electronics Products Segment**: Sales increased by 10% year-over-year and 4% organically, with passive products up 14% organically, while semiconductor products declined by 5% [22][23] - **Transportation Products Segment**: Sales grew by 6%, with organic sales up 4%. Passenger car sales increased by 3% organically across North America, Europe, and China [24] - **Industrial Products Segment**: Sales grew by 17% organically, benefiting from strong growth in grid storage, renewable energy, data centers, industrial safety, and HVAC [25][26] Market Data and Key Metrics Changes - The company reported a book-to-bill ratio above one, with bookings at the highest run rate since 2022, indicating strong demand across all segments [7][8] - The company is experiencing increased demand for higher power and higher energy density applications across its end markets, which is driving growth [9][10] Company Strategy and Development Direction - The company is focusing on enhancing its capabilities to capitalize on future growth opportunities, particularly in higher voltage and higher energy density applications [9][10] - There is a strategic priority to provide more complete solutions for a broader set of customers, leveraging the company's unique product portfolio [11][12] - The company is also working on driving operational excellence to enhance long-term profitability and optimize its operating structure [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue strong growth into the third quarter, supported by a solid backlog and improved operational execution [17][20] - The management team highlighted the importance of aligning technology capabilities and sales structures to better serve customers and drive ongoing product innovations [11][12] Other Important Information - The company generated $73 million in free cash flow during the quarter, with a strong cash position of $685 million and a net debt to EBITDA leverage of 1.1 times [21] - The company plans to prioritize cash flow for organic investments and strategic acquisitions while continuing to return capital to shareholders through dividends and share buybacks [21][22] Q&A Session Summary Question: Margin upside in Transportation and Industrial segments - Management discussed the focus on operational excellence and diversifying the portfolio to improve margins in the Transportation segment, with expectations for continued margin upside [31][34][36] Question: Clarification on tariff timing impacts - Management clarified that the timing of price realization versus incurred costs resulted in a $0.15 benefit in Q2 that would reverse in Q3 [40][42] Question: Insights on the Industrial segment's performance - Management expressed excitement about the Industrial segment's growth, emphasizing the focus on energy storage and data center markets [44][46] Question: Data center exposure and growth - Management confirmed that data center solutions are becoming increasingly important, with strong traction in design wins and a growing pipeline [48][50][54] Question: Visibility on demand and market conditions - Management noted improved visibility in end markets compared to previous months, with expectations for continued growth across all segments [99][100][102]