SDA

Business Context and Reporting Period

Suncar Technology Group Inc. (Nasdaq: SDA) is a Cayman Islands exempted company operating as a leading provider of cloud, AI, and mobile app-based auto eInsurance services, technology services, and auto services in China. The company operates through its PRC subsidiaries, facilitating insurance sales for major insurers and providing integrated auto service solutions to enterprise customers (banks, insurers, telecoms). This Form 20-F covers the fiscal year ended December 31, 2025.

Key Financial Metrics (Year Ended Dec 31, 2025)

Revenue Breakdown (2025): Auto eInsurance ($212.6M, +25% YoY), Technology Services ($53.6M, +19% YoY), Auto Services ($223.1M, -1% YoY).

Material Changes vs. Prior Period

• Profitability Turnaround: The company returned to operating profitability in 2025 ($3.9M income) compared to a significant operating loss in 2024 ($58.4M). Net loss narrowed dramatically from $64.5M to $2.4M.
• Expense Reduction: General and administrative expenses dropped 60% ($47.0M to $19.0M) and R&D expenses fell 78% ($40.2M to $9.0M). These reductions were primarily driven by a decrease of approximately $62.5M in share-based compensation expenses related to the 2024 Equity Incentive Plan.
• Revenue Growth: Total revenue grew 11% YoY, driven by a 25% increase in Auto eInsurance revenue (partially fueled by a 50.6% surge in EV insurance revenue) and a 19% increase in Technology Services.
• Capital Structure: The company completed a share repurchase program in 2025, buying back 3,438,557 Class A Ordinary Shares for approximately $15.8M.

Guidance, Outlook, and Risks

Outlook and Strategy: Management focuses on leveraging the rapid growth of China's Electric Vehicle (EV) market, where EVs accounted for ~49% of new sales in 2025. Strategic initiatives include deepening partnerships with EV OEMs (e.g., Tesla, Xiaomi, Huawei, NIO) to embed insurance and service solutions, and transitioning technology services to a SaaS model. The company plans to continue investing in AI (DeepSeek, ByteDance Doubao) to enhance operational efficiency.

Key Risks:

• Regulatory Environment: Significant exposure to PRC regulations regarding data security, cross-border data transfers, and insurance commission rates. Changes in PRC laws could impact operations or listing status.
• Customer Concentration: In 2025, two customers accounted for 39% of total revenue. Loss of major enterprise clients (banks, insurers) could materially impact results.
• Liquidity and Debt: While operating cash flow was positive, the company carries significant short-term borrowings ($80.4M). Future liquidity depends on operating performance and ability to refinance debt.
• Internal Controls: The company is an "emerging growth company" and has not yet been subject to auditor attestation of internal controls under Section 404(b) of Sarbanes-Oxley, though management concluded controls were effective as of Dec 31, 2025.

Investor Verification Checklist

• Share-Based Compensation Volatility: Verify the sustainability of the 2025 profit improvement, which was heavily influenced by a one-time drop in share-based compensation expenses compared to 2024.
• Debt Maturity Profile: Review the terms and maturity dates of the $80.4M in short-term borrowings to assess refinancing risk.
• Customer Concentration: Identify the specific enterprise customers comprising the 39% revenue concentration and assess the stability of their contracts.
• EV Insurance Margins: Analyze the profitability of the high-growth EV insurance segment, as regulatory changes in commission rates could impact this key growth driver.
• PRC Regulatory Compliance: Monitor updates on PRC data security laws and insurance regulations that could affect the company's ability to operate or list on U.S. exchanges.