Greetings. Welcome to the China Automotive Systems Third Quarter 2024 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kevin Theiss. You may begin.

Thank you, everyone, for joining us today. Welcome to China Automotive Systems 2024 third quarter 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. Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 the forward-looking statements due to a number of factors, including those described under the heading Risk Factors and Results of Operations 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 documents filed by the company from time to time with the Securities and Exchange Commission. Any of these factors and other factors beyond our control could have an 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 and materially and adversely impact our business, financial condition and results of operations. A prolonged disruption or any unforeseen delay in our operations of the manufacturing, delivery and assembly processes within any of our production facilities could result in delays in the shipment of products to our customers, increased costs and reduced revenue. 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. On this call, I will provide a…

[Operator Instructions] Your first question for today is from [ Gary Nash ] a Private Investor.

Good day, good evening to everyone. First of all, can everyone hear me clearly because I was having some issues in hearing on the side. Can everyone hear me clearly?

Yes.

Okay, great. Thanks. I have two questions. My first question is, please, if you would please describe the onetime income tax expense settlement for the subsidiaries in China?

Yes. So Gary, to your question on the onetime tax in China, that's related to third quarter 2024, we declared a dividend of USD 0.80 special dividend. And that came from our CAAS's China subsidiary and distribute the dividend to the parent company, and then we distribute to the shareholders. This process will have triggered a onetime tax called withholding tax you had to pay to the Chinese government. It totaled at $1.4 million. It's one time. It's a dividend related to distribute the profit they earn in China over the years and to the shareholders outside of China.

Okay. Thank you. And my second question is, if you indulge me, why did the GILTI taxes increase in the third quarter of 2024?

Great. Gary, your second question on the GILTI tax. This particular tax, GILTI tax is enacted by Trump administration starting in 2017. And a product -- that's a product from their tax reform back in 2017. Since it's a tax design for a foreign subsidiary of a U.S. company, their profit earned outside the U.S. subject to such tax. As a result of that, in compliance, we have accrued and paid such tax since 2020, every year. And how do we calculate this particular tax? This calculation is based on previous year's pretax profit or pretax income, okay? So to give you some detailed math numbers. In 2022, the pretax income was $23 million. And so for 2023, and we use that $23 million as a base to calculate and then we will accrue and pay every quarter, that amounted to approximately $1.2 million. However, as you already know, as a shareholder, 2023, our business has grown significantly, so was our profit. Our profit went to $48 million. And as a result of that, and we're going to use that as a base to calculate the GILTI tax for 2024. And the result of that is $1.7 million per quarter for 2024. So this is the reason why you see there is such a significant increase of GILTI tax item in Q3 2024.

Okay, all right. Thank you very much. That was very helpful. I appreciate it.

Thank you.

Thank you. Your next question is from Jonathan Navis, a Private Investor.

Hello. How's everybody doing?

Good, thank you.

All right. My question is foreign exchange volatility sometimes creates income or losses. What is the company doing to reduce the impact of foreign exchange volatility on quarterly profits?

Regarding your question on the ForEx and potential impact to the earnings. To be honest, we do have a pretty bigger footprint, global footprint, we do have a task on this particular area as we have business in United States, we have business in Brazil, we have business in China, and we have other areas of business in different regions of the world. Because of these, we have to deal with different currencies. We have started last year to experiment and to try some of the financial tools to mitigate the ForEx impact. And however, the various tools we tried or the result hasn't been very satisfactory. And so the next step we're going to do is we have stopped using those tools because we haven't seen the result we wanted. So going forward, we are in a discussion with a number of large financial institutions global to see if there can have some better tools and solutions for us to help us to manage the ForEx risk.

All right, thank you very much.

[Operator Instructions] Your next question for today is from Jessica Lin, a Private Investor. Hello, good morning.

I was just wondering what business segments are expected to contribute to the increase in sales guidance to the $630 million for 2024?

So to your question, it's actually there's no particular area or segment has contributing to the overall increase of our guidance. But we can give you a little color on why is that because every area of the business has experienced healthy growth. We're very pleased to share with our shareholders. And as early as April, May period of time, after further assessment of the market opportunities and also the challenges, and we decided we're going to take a proactive pricing strategy. We made some adjustment on the pricing and that's being very targeted and our goal is to increase market share. As a result of that, as you see in our third quarter results, our domestic China market sales has booked about $146 million, and that represents about 19% year-over-year growth in domestic China. And if you follow the industry stats, you know the third quarter, the Chinese auto market hasn't been doing so well as a whole industry. But we are able to register such a growth is because our strategy has been working. So we are, in fact, gaining market share. And that's witnessed by our growth in our traditional hydraulic product that's also reflected in our growth, in our new flagship product, which is electric power steering product, EPS product. And we're also growing our market share inside our largest customer, BYD. And also, we're growing in the export market as well. So overall, we are working with the best customers, and we are producing the right type of product to meet their demand. And so as a result of that, we are more confident to see the fourth quarter, and that's why we decided to increase the whole year guidance from the low $600 million to $630.

Thank you so much.

[Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to Kevin for closing remarks.

Thank you, everybody, for attending today's call, and we look forward to speaking with you on the next quarterly call.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.