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Kandi Technologies Reports First Quarter 2019 Financial Results

Kandi Technologies Reports First Quarter 2019 Financial Results

- Q1 revenue increased 116.8% YoY to $18.1 million
- Q1 off-road vehicles sales increased 169.8% YoY to $5.3 million
- Q1 gross margin increased to 17.4% compared to 16.1%

JINHUA, China, May 10, 2019 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), today announced its financial results for the first quarter of 2019.

First Quarter Highlights

  • Total revenues increased 116.8% to $18.1 million for the first quarter of 2019, from $8.3 million for the same period in 2018.
  • Electric Vehicle (“EV”) parts sales increased 100.4% to $12.8 million for the first quarter of 2019, compared with $6.4 million in the same period in 2018.
  • Off-road vehicle revenues increased 169.8% to $5.3 million for the first quarter of 2019 compared with $2.0 million in the same period in 2018.
  • GAAP net loss for the first quarter of 2019 was $4.4 million, or $0.09 loss per fully-diluted share, compared with net income of $3.7 million, or $0.07 income per fully-diluted share in the same period in 2018.
  • Non-GAAP adjusted net loss1, which excludes stock compensation expenses of $0.03 million and changes in the fair value of contingent consideration, which was a gain of $0.09 million, was $4.5 million in the first quarter of 2019, compared with non-GAAP net loss of $0.6 million for the same period of 2018. Non-GAAP adjusted loss per share1 was approximately $0.09 loss per fully diluted share for the first quarter of 2019 compared with Non-GAAP adjusted loss per share1 of $0.01 per fully diluted share for the same quarter in 2018.
  • The Company’s working capital surplus was $8.5 million as of March 31, 2019. Cash, cash equivalents and restricted cash totaled $8.4 million as of March 31, 2019.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, “Total revenues in the first quarter increased 116.8%, which represents an incredible year-over-year growth. However, the Chinese government’s national subsidy policy adjustment during the first quarter coupled with the JV Company’s pending restructuring, which is taking place in order to maximize the JV Company’s ability to grow into a prominent company, has resulted in our modifying the JV Company’s business development plan with respect to its integration into Geely under Geely’s management as a primary shareholder. This transition period has directly impacted production and sales, causing a loss for the JV Company. Despite this transitional period, the JV Company has made many meaningful advances in the first quarter. In the beginning of the year, Kandi Jiangsu received an approval notice from Jiangsu Development and Reform Commission with respect to Kandi Jiangsu’s application to an annual capacity of 50,000 pure electric vehicles project. This approval gives Kandi Jiangsu a license to build the factory for EV manufacturing. In April, a team of EV industry experts from the Ministry of Industry and Information Technology and we are currently anticipating approval.”

“Additionally, Kandi has taken advantage of every available opportunity to get into the online ride-hailing market by signing cooperative agreements with several major industry players such as Zhejiang Ruibo, Caocao Zhuan Che, China Resources (Zhejiang), and Didi Chuxing to provide government-accredited EVs. We strongly believe that car-sharing is a promising area with significant room for growth, and that the Company’s continued efforts in laying the foundations for supplying government-accredited EVs to drive sales growth will allow us to regain our position as the leading electric vehicle products manufacturer in the market. Furthermore, the JV Company will be able to achieve faster growth with Geely’s corporate resources and branding profile. While the restructuring reduces Kandi’s equity stake in the JV company to 22%, we believe that the value of Kandi’s 22% equity ownership in the JV Company, following the restructuring, will far exceed Kandi’s original 50% equity in the future.” Mr. Hu concluded.

Net Revenues and Gross Profit

  1Q19   1Q18   Y-o-Y%  
Net Revenues (US$mln) $18.1   $8.3   116.8%  
Gross Profit (US$mln) $3.1   $1.3   113.6%  
Gross Margin 17.4%   16.1%   -  


Net revenues for the first quarter increased 116.8% compared to the same period last year. The increase in revenue was mainly due to the increase in EV parts sales during this quarter. The increase in EV parts sales was primarily due to the increased sales volume of battery packs.

Operating Income (Loss)

  1Q19   1Q18   Y-o-Y%  
Operating Expenses (US$mln) $3.2   $1.1   188.5%)  
Operating (Loss) Income (US$mln) ($0.06)   $0.2   (124.5%)  
Operating Margin (0.3%)   2.9%   -  

Total operating expenses in the first quarter were $3.2 million, compared with $1.1 million in the same quarter of 2018. The increase in total operating expenses was primarily due to increased general and administrative, which was $2.1 million in this quarter, compared with $0.4 million in the same quarter last year.

GAAP Net Income

  1Q19   1Q18   Y-o-Y%  
Net (Loss) Income (US$mln) ($4.4)   $3.7   (218.3%)  
(Loss) earnings per Weighted Average Common Share Outstanding Basic ($0.09)   $0.07   -  
(Loss) earnings per Weighted Average Common Share Outstanding Diluted ($0.09)   $0.07   -  
Stock Compensation expenses $0.03   ($1.6)   -  
Change in fair value of contingent consideration ($0.09)   ($2.7)   -  
Non-GAAP net Loss ($4.5)   ($0.6)   686.6%  

Net loss was $4.4 million in the first quarter, compared with net income of $3.7 million in the same quarter of 2018. The decrease was primarily attributable to the increased share of loss of the JV Company compared to the same period of last year.

Non-GAAP net loss was $4.5 million, a 686.6% increase in loss in the first quarter of 2019 compared to net loss of $0.6 million in the same quarter of 2018. The increase in Non-GAAP net loss was primarily attributable to an increased share of loss of the JV Company from the JV Company compared to the same period of last year.

JV Company Financial Results

In this quarter, total revenue was $1.3 million as compared to $33.8 million for the quarter ended March 31, 2018.

The condensed financial income statement of the JV Company in the first quarter is as below:

  1Q19   1Q18   Y-o-Y%  
Net Revenues (US$mln) $1.3   $33.8   (96.3%)  
Gross (Loss) Profit (US$mln) ($0.02)   $5.6   (100.4%)  
Gross Margin (1.7%)   16.5%   -  
Net (Loss) Income ($20.2)   $1.0   (2076.4%)  
% of Net revenue (1606.5%)   3.0%   -  

Kandi’s investments in the JV Company are accounted for under the equity method of accounting. Since loan to equity conversion in the JV Company resulting Kandi a 43.47% ownership was completed at end of this quarter and the transfer of 21.47% equity interests in the JV Company to a Geely affiliate has not been completed as of March 31, 2019, Kandi recorded 50% of the JV Company’s loss of $10.1 million for this quarter. After eliminating intra-entity profits and losses, Kandi’s share of the after tax loss of the JV Company was $9.9 million for the first quarter of 2019.

First Quarter of 2019 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss its financial results at 8:00 A.M. Eastern Time (8:00 P.M. Beijing Time) on May 10, 2019. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Ms. Zhu Xiaoying, interim Chief Financial Officer of the Company, will deliver prepared remarks to be followed by a question and answer session.  

The dial-in details for the conference call are as follows:

The live audio webcast can also be accessed by visiting Kandi's Investor Relations page on the Company’s website at http://www.kandivehicle.com. An archive of the webcast will be available on the Company’s website following the live call.

About Kandi Technologies Group, Inc.

Kandi Technologies Group, Inc. (KNDI), headquartered in Jinhua Economic Development Zone, Zhejiang Province, is engaged in the research, development, manufacturing, and sales of various vehicular products. Kandi conducts its primary business operations through its wholly-owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. ("Kandi Vehicles") and its subsidiaries, SC Autosports, LLC, the wholly-owned subsidiary of Kandi in the United States and Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”). Kandi Vehicles has established itself as one of China's leading manufacturers of pure electric vehicle parts and off-road vehicles.

In 2013, Kandi Vehicles and Geely Group, China's leading automaker, jointly invested in the establishment of the JV Company in order to develop, manufacture and sell pure electric vehicle ("EV") products. As of March 31, 2019, Geely Group (including its affiliate) hold a 56.53%, and Kandi Vehicles holds 43.47% in the JV Company, pending a closing of a transfer of 22% of the equity interests of the JV Company from Kandi Vehicles to a Geely’s affiliate, resulting in Kandi Vehicles to hold 21.47% upon the closing.  The JV Company has established itself as one of the driving forces in the development and the manufacturing of pure EV products in China.

More information about KNDI is available on the Company's corporate website at http://www.kandivehicle.com. The Company routinely posts important information on its website.

Safe Harbor Statement
This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Follow us on Twitter: @ Kandi_Group
Company Contact:

Ms. Kewa Luo
Kandi Technologies Group, Inc.
Phone: 1-212-551-3610
Email: IR@kandigroup.com

– Tables Below –

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET

  March 31,
2019
    December 31,
2018
 
  (UNAUDITED)        
Current assets          
Cash and cash equivalents $ 3,327,013     $ 15,662,201  
Restricted cash   5,134,661       6,690,870  
Accounts receivable (net of allowance for doubtful accounts of $138,678 and $120,010 as of March 31, 2019 and December 31, 2018, respectively)   49,397,918       34,274,728  
Inventories (net of provision for slow moving inventory of $829,523 and $840,701 as of March 31, 2019 and December 31, 2018, respectively)   27,223,890       21,997,868  
Notes receivable   -       72,712  
Notes receivable from the JV Company and related party   3,769,874       3,861,032  
Other receivables   2,662,856       1,264,323  
Prepayments and prepaid expense   10,864,614       11,136,408  
Due from employees   2,522       1,001  
Advances to suppliers   4,919,164       4,705,183  
Amount due from the JV Company, net   61,060,228       67,683,462  
Right - of - use asset   108,324       -  
TOTAL CURRENT ASSETS   168,471,064       167,349,788  
               
LONG-TERM ASSETS              
Property, plant and equipment, net   82,341,986       82,045,923  
Land use rights, net   11,954,930       11,749,728  
Deferred taxes assets   11,461       8,204  
Investment in the JV Company   126,492,405       128,929,893  
Goodwill   29,087,159       28,552,215  
Intangible assets   4,268,365       4,328,127  
Other long term assets   5,708,341       5,865,386  
TOTAL Long-Term Assets   259,864,647       261,479,476  
               
TOTAL ASSETS $ 428,335,711     $ 428,829,264  
               
CURRENT LIABILITIES              
Accounts payable $ 114,345,244     $ 112,309,683  
Other payables and accrued expenses   4,353,437       4,251,487  
Short-term loans   31,291,443       30,539,236  
Customer deposits   132,921       94,408  
Notes payable   6,300,010       12,787,619  
Income tax payable   2,046,046       3,471,366  
Due to employees   8,595       28,473  
Deferred income   1,362,082       1,340,605  
Lease liability   108,324       -  
Total Current Liabilities   159,948,102       164,822,877  
               
LONG-TERM LIABILITIES              
Long term bank loans   29,503,360       28,794,136  
Deferred taxes liability   1,711,343       1,711,343  
Contingent liability   7,167,000       7,256,000  
Other long-term liability   -       622,034  
Total Long-Term Liabilities   38,381,703       38,383,513  
               
TOTAL LIABILITIES   198,329,805       203,206,390  
               
STOCKHOLDER’S EQUITY              
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,004,502 and 55,992,002 shares issued and 52,580,841 and 51,484,444 outstanding at March 31,2019 and December 31,2018, respectively   52,581       51,484  
Additional paid-in capital   258,377,036       254,989,657  
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at March 31,2019 and December 31,2018, respectively)   (13,906,481 )     (9,497,009 )
Accumulated other comprehensive loss   (14,517,230 )     (19,921,258 )
TOTAL STOCKHOLDERS’ EQUITY   230,005,906       225,622,874  
               
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 428,335,711     $ 428,829,264  
               

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

  Three Months Ended  
  March 31,
2019
    March 31,
2018
 
           
REVENUES FROM UNRELATED PARTY, NET   16,334,963       5,732,463  
REVENUES FROM THE JV COMPANY AND RELATED PARTY, NET   1,733,497       2,603,444  
               
REVENUES, NET   18,068,460       8,335,907  
               
COST OF GOODS SOLD   (14,932,023 )     (6,989,956 )
               
GROSS PROFIT   3,136,437       1,345,951  
               
OPERATING EXPENSES:          
Research and development   (537,433 )     (757,298 )
Selling and marketing   (618,003 )     (748,225 )
General and administrative   (2,039,528 )     398,171  
Total Operating Expenses   (3,194,964 )     (1,107,352 )
               
(LOSS) INCOME FROM OPERATIONS   (58,527 )     238,599  
               
OTHER INCOME (EXPENSE):          
Interest income   252,404       942,993  
Interest expense   (439,183 )     (550,417 )
Change in fair value of contingent consideration   89,000       2,680,179  
Government grants   47,724       95,255  
Gain from equity dilution in JV   4,365,390       -  
Share of (loss) income after tax of the JV Company   (9,949,158 )     795,055  
Other income , net   474,390       22,977  
Total other (expense) income, net   (5,159,433 )     3,986,042  
               
(LOSS) INCOME BEFORE INCOME TAXES   (5,217,960 )     4,224,641  
               
INCOME TAX BENEFIT (EXPENSE)   808,488       (496,646 )
               
NET (LOSS) INCOME   (4,409,472 )     3,727,995  
               
OTHER COMPREHENSIVE INCOME          
Foreign currency translation   5,404,028       7,465,240  
         
COMPREHENSIVE INCOME   994,556     $ 11,193,235  
         
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC   51,565,287       50,643,423  
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED   51,565,287       50,643,423  
               
NET (LOSS) INCOME PER SHARE, BASIC   (0.09 )   $ 0.07  
NET (LOSS) INCOME PER SHARE, DILUTED   (0.09 )   $ 0.07  
               

KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  Three Months Ended  
  March 31,
2019
    March 31,
2018
 
           
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net (loss) income $ (4,409,472 )   $ 3,727,995  
Adjustments to reconcile net income to net cash provided by operating activities              
Depreciation and amortization   2,258,224       875,463  
Assets impairments   (31,718 )     -  
Allowance for doubtful accounts   15,629       240,419  
Deferred taxes   -       (308,406 )
Share of (loss) income after tax of the JV Company   9,949,158       (795,055 )
Gain from equity dilution in JV   (4,365,390 )     -  
Change in fair value of contingent consideration   (89,000 )     (2,680,179 )
Stock compensation cost   31,675       (1,615,706 )
               
Changes in operating assets and liabilities, net of effects of acquisition:              
(Increase) Decrease In:              
Accounts receivable   (17,991,854 )     12,343,813  
Deferred taxes assets   -       (53,414 )
Notes receivable   74,114       -  
Notes receivable from the JV Company and related party   444,682       (5,015,238 )
Inventories   (4,659,780 )     265,800  
Other receivables and other assets   (14,256,807 )     752,017  
Due from employee   (21,961 )     (23,838 )
Advances to supplier and prepayments and prepaid expenses   436,768       3,144,325  
Advances to suppliers-long term   -       (3,712,576 )
Amount due from the JV Company   (2,339,431 )     (9,902,514 )
               
Increase (Decrease) In:              
Accounts payable   22,593,966       19,319,570  
Other payables and accrued liabilities   5,459,852       (2,503,830 )
Notes payable   (5,624,153 )     (16,117,038 )
Customer deposits   36,544       120,458  
Income tax payable   (1,537,204 )     (819,372 )
Deferred income   (11,483 )     1,670,173  
Net cash used in operating activities $ (14,037,641 )   $ (1,087,133 )
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
Purchases of property, plant and equipment, net   (300,704 )     (109,160 )
Purchases of land use rights and other intangible assets   -       (99,404 )
Acquisition of Jinhua An Kao (net of cash received)   -       (3,699,801 )
Purchases of construction in progress   -       (82,792 )
Net cash used in investing activities $ (300,704 )   $ (3,991,157 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Proceeds from short-term bank loans   2,816,317       3,775,587  
Repayments of short-term bank loans   (2,816,317 )     (3,775,587 )
Proceeds from notes payable   -       25,539,803  
Repayment of notes payable   -       (28,607,869 )
Net cash used in financing activities $ -     $ (3,068,066 )
               
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH   (14,338,345 )     (8,146,356 )
Effect of exchange rate changes on cash   446,948       568,965  
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR   22,353,071       16,110,496  
               
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD   8,461,674       8,533,105  
               
SUPPLEMENTARY CASH FLOW INFORMATION              
Income taxes paid   594,425       1,466,761  
Interest paid   439,183       414,319  
               
SUPPLEMENTAL NON-CASH DISCLOSURES:              
Long term and short term Advances to suppliers transferred to Construction in progress   -       3,712,576  
Settlement of due from the JV Company and related parties with notes receivable from related parties   10,586,387       20,337,201  
Settlement of accounts receivables with notes receivable from unrelated parties   3,750,148       7,866  
Settlement of other receivables with notes receivable from unrelated parties   2,001,067       -  
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable   5,751,215       7,866  
Assignment of notes receivable from the JV Company and related parties to supplier to settle accounts payable   15,277,778       18,996,867  
Assignment of notes receivable from the JV Company and related parties to supplier to settle other payable   6,166,252       -  
Settlement of accounts payable with notes payables   2,488,735       786,581  
Replacement of notes payables with accounts payable   3,631,566       -  
Deferred tax changed to other comprehensive income   -       42,528  
               

  KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY  
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018  
(UNAUDITED)

    Common Stock   Additional   Accumulated Other      
    Shares   Par
Value
  Paid-in
Capital
  Retained
Earnings
  Comprehensive
 Income
  Total  
BALANCE AT JANUARY 1, 2018     48,036,538   $ 48,037   $ 233,055,348   $ (3,802,310 ) $ (6,310,763 ) $ 222,990,312  
Stock issuance and award     2,972,337     2,972     19,099,556                 19,102,528  
Foreign currency translation                             7,465,240     7,465,240  
Net income                       3,727,995           3,727,995  
                                       
BALANCE AT MARCH 31, 2018     51,008,875   $ 51,009   $ 252,154,904   $ (74,315 ) $ 1,154,477   $ 253,286,075  
                                       
BALANCE AT JANUARY 1, 2019     51,484,444   $ 51,484   $ 254,989,657   $ (9,497,009 ) $ (19,921,258 ) $ 225,622,874  
Stock issuance and award     1,096,397     1,097     3,387,379                 3,388,476  
Foreign currency translation                             5,404,028     5,404,028  
Net loss                       (4,409,472 )         (4,409,472 )
                                       
BALANCE AT MARCH 31, 2019     52,580,841   $ 52,581   $ 258,377,036   $ (13,906,481 ) $ (14,517,230 ) $ 230,005,906  
                                       


1
Non-GAAP measures, including the Non-GAAP net income (loss) and Non-GAAP EPS are defined as the financial measures excluding the change of the fair value of contingent consideration and the effects of the stock compensation expense. We supply non-GAAP information because we believe it allows our investors to obtain a clearer understanding of our operations. Any non-GAAP measures should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance prepared in accordance with GAAP.