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Kandi Technologies Reports Full Year 2018 Financial Results

JINHUA, China, March 15, 2019 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), announced its financial results for the full year ended December 31, 2018 today. 

Full Year 2018 Highlights

  • Total revenues were $112.4 million in 2018, an increase of 9.4% from total revenues of $102.8 million in 2017.

  • EV parts sales increased by 1.8% to $99.1 million in 2018, compared with EV parts sales of $97.4 million in 2017.

  • Off-road vehicles sales increased by 144.8% to $13.3 million in 2018, compared with off-road vehicles sales of $5.4 million in 2017.

  • Gross margin for the year ended December 31, 2018 was 18.0%, compared to 14.0% for the year ended December 31, 2017.

  • Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”) sold 10,259 EV products in 2018, compared to 11,437 EV products sold in 2017, a decrease of 10.3%.

  • Income before income taxes in 2018 was $2.08 million, compared with loss before income taxes of $31.61 million in 2017.

  • GAAP net loss in 2018 was $5.7 million, or $0.11 loss per fully diluted share, compared with GAAP net loss of $28.3 million, or $0.59 loss per fully diluted share in 2017.

  • Non-GAAP adjusted net loss1 which excludes stock award expenses and gain of changes in the fair value of contingent consideration, was $8.8 million in 2018, compared with non-GAAP adjusted net loss of $23.2 million in 2017. Non-GAAP adjusted loss per share1 was approximately $0.17 per fully diluted share for the full year of 2018, compared with non-GAAP adjusted loss per share of $0.48 per fully diluted share for the full year of 2017.

  • Working capital surplus was $2.5 million as of December 31, 2018. Cash, cash equivalents and restricted cash totaled $22.4 million as of December 31, 2018.

____________________________
1Non-GAAP measures, including Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change of fair value of contingent consideration and the effects of stock award expenses. We supply non-GAAP information because we believe it allows our investors to obtain a clearer understanding of our operations. Any non-GAAP measure 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.


Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, comments, “Kandi has experienced challenges over the past few years due to the confusion surrounding the reusable battery exchange model. However, Kandi has been working diligently to overcome the downturn and obstacles to resolve these issues. Early on in 2018, we prepared a three-year plan for 2018 through 2020 based on our company’s and the industry’s situation. 2018 was to be the year of survival, 2019 of revival, and 2020 will be the year of prosperity. Through our hard work in 2018, we rebuilt and refined our practices, and as a result, we are very pleased with our financial performance. In 2018, our total revenue was up 9.4% to $112 million; while pre-tax income was $2.1 million compared to a loss of $31.6 million in 2017. In 2019, we plan to continue this upwards momentum, and further refine our business model and execution plan to forge new opportunities moving forward in the following ways.”

“First, the management team hopes the JV Company to achieve its projected goals of producing and selling 20,000 EVs in 2019. Second, the Company is expecting to obtain the approval of its application for a manufacturing license from the Ministry of Industry and Information Technology to become an official EV manufacturing enterprise with “dual production licenses”. Third, following the U.S. National Highway Traffic Safety Administration’s (NHTSA) approval of certain Kandi EV models for importation and registration in the U.S., Kandi EV models are now eligible for up to $7,500 in federal tax credits in 2019 and 2020. To capitalize on the opportunity presented by the NHTSA’s approval, we are in the process of preparing a strategic sales plan for the debut of Kandi EV models in the American market later this year. Fourth, the car share program (or Micro Public Transportation) has been upgraded to an online ride-hailing business model in China, which is expected to open up a broader market for Kandi electric vehicles. Finally, the Company is evaluating for the optimal time to restructure the JV Company’s equity in order to unlock the shareholder value of the JV Company. We are dedicated in taking full advantage of the milestones we have reached thus far, achieving stronger business results in 2019, as well as maximizing our long-term shareholders’ investments,” Mr. Hu concluded.

Full Year 2018 Financial Results

Net Revenues and Gross Profit

    2018     2017   Y-o-Y%  
Net Revenues (US$mln) $112.4   $102.8   9.4%  
Gross Profit (US$mln) $20.2   $14.3   41.2%  
Gross Margin   18.0%     14.0%   -  

Net revenues for the full year 2018 increased 9.4% from 2017. The increase in net revenues was mainly due to an increase in sales of off-road vehicles in 2018. Gross margin for the full year 2018 increased to 18.0%, compared with 14.0% in 2017. The increase in the gross margin was mainly due to the higher gross margin from off-road vehicle sales of SC Autosports, a result of its effective procurement of inventories at discounted prices, as well as increased gross margin from sales of battery packs.

Operating Income (Loss)

    2018     2017   Y-o-Y%  
Operating Expenses (US$mln) $21.9   $40.4   -45.9%  
Operating Loss (US$mln) ($1.6)   ($26.1)   -93.7%  
Operating Margin   -1.5%     -25.4%   -  

Total operating expenses in 2018 were $21.9 million, compared with $40.4 million in 2017. The decrease in total operating expenses was due to largely decreased research and development expenses in 2018.

GAAP Net Loss

    2018     2017   Y-o-Y%  
GAAP Net Loss (US$mln) ($5.7)   ($28.3)   -79.9%  
Loss per Weighted Average Common Share ($0.11)   ($0.59)   -  
Loss per Weighted Average Diluted Share ($0.11)   ($0.59)   -  

Non-GAAP Financial Measures

We make reference to certain non-GAAP financial measures, i.e., adjusted net income. Management believes that such adjusted financial results are useful for investors in evaluating our operating performance because they present a meaningful measure of corporate performance. See the non-GAAP reconciliation table below. 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 the GAAP.

Non-GAAP financial measure   2018     2017   Y-o-Y%  
GAAP Net Loss (US$mln) ($5.7)   ($28.3)   -79.9%  
Stock award expenses (US$mln) $0.29   $5.2   -94.4%  
Change of the fair value of contingent consideration $(3.4)     -   -  
Non-GAAP net Loss (US$mln) ($8.8)   ($23.2)   -61.9%  

Net loss in 2018 was $5.7 million, compared with net loss of $28.3 million in 2017. The decrease in net loss was primarily attributable to the increased gross profits, the decreased in R&D expenses and the increased government grand the Company received this year.

JV Company Financial Results

In the full year 2018, the JV Company sold 10,259 units of EV products in China.

The condensed financial income statement of the JV Company for the full year 2018 is as set forth below:

    2018     2017   Y-o-Y%  
Net Revenues (US$mln) $122.5   $192.7   -36.5%  
Gross (Loss) Profit (US$mln) ($17.7)   $3.6   -593.1%  
Gross Margin   -14.5%     1.9%   -  
Net Loss (US$mln) ($36.3)   ($22.7)   60.1%  
% of Net revenues   -29.7%     -11.8%   -  

Kandi’s investments in the JV Company are accounted for under the equity method of accounting, as Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company’s loss for $18.2 million for the full year 2018. After eliminating intra-entity profits and losses, Kandi’s share of the after tax loss of the JV Company was $17.9 million for the full year 2018.

Full Year 2018 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss the financial results at 8:00 AM (U.S. Eastern Time) on March 15, 2019 (8:00 PM Beijing Time on March 15, 2019). Mr. Hu Xiaoming, the Company’s Chief Executive Officer and Ms. Emily Zhu, the Company’s Interim Chief Financial Officer, will deliver prepared remarks, followed by a question and answer session.

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

A live audio webcast of the call may also be accessed by visiting Kandi's Investor Relations website at http://ir.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"), SC Autosports, LLC, the wholly-owned subsidiary of Kandi Vehicles, 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 2018, each party has invested RMB 1.045 billion in the JV Company, for a total investment of RMB 2.09 billion with each party (including Geely Group’s affiliate) holding a 50% stake in the JV Company. 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 applicable 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  
CONSOLIDATED BALANCE SHEETS  
   
    December 31,
2018
    December 31,
2017
 
             
Current assets            
Cash and cash equivalents   $ 15,662,201     $ 4,891,808  
Restricted cash     6,690,870       11,218,688  
Accounts receivable (net of allowance for doubtful accounts of $120,010 and $133,930 as of December 31, 2018 and December 31, 2017, respectively)     34,274,728       34,397,858  
Inventories (net of provision for slow moving inventory of $840,701 and $620,919 as of December 31, 2018 and December 31, 2017, respectively)     21,997,868       15,979,794  
Notes receivable     72,712       -  
Notes receivable from JV Company and related party     3,861,032       1,137,289  
Other receivables     1,264,323       2,650,668  
Prepayments and prepaid expense     11,136,408       6,536,839  
Due from employees     1,001       7,070  
Advances to suppliers     4,705,183       14,908,385  
Amount due from JV Company, net     67,683,462       146,422,440  
Amount due from related party     -       162,048  
TOTAL CURRENT ASSETS     167,349,788       238,312,887  
                 
LONG-TERM ASSETS                
Property, plant and equipment, net     82,045,923       12,000,971  
Land use rights, net     11,749,728       12,666,047  
Construction in progress     -       53,083,925  
Deferred taxes assets     8,204       4,383,425  
Long term investment     -       1,460,034  
Investment in JV Company     128,929,893       70,681,013  
Goodwill     28,552,215       322,591  
Intangible assets     4,328,127       331,116  
Advances to suppliers     -       21,592,918  
Other long term assets     5,865,386       7,590,734  
Amount due from JV Company, net     -       15,907,183  
TOTAL Long-Term Assets     261,479,476       200,019,957  
                 
TOTAL ASSETS   $ 428,829,264     $ 438,332,844  
                 
CURRENT LIABILITIES                
Accounts payables   $ 112,309,683     $ 111,595,540  
Other payables and accrued expenses     4,251,487       6,556,209  
Short-term loans     30,539,236       33,042,864  
Customer deposits     94,408       205,544  
Notes payable     12,787,619       28,075,945  
Income tax payable     3,471,366       2,902,699  
Due to employees     28,473       35,041  
Deferred income     1,340,605       2,191,143  
Total Current Liabilities     164,822,877       184,604,985  
                 
LONG-TERM LIABILITIES                
Long term bank loans     28,794,136       30,737,547  
Deferred taxes liabilities     1,711,343       -  
Contingent liability     7,256,000       -  
Other long-term liability     622,034       -  
Total Long-Term Liabilities     38,383,513       30,737,547  
                 
TOTAL LIABILITIES     203,206,390       215,342,532  
                 
STOCKHOLDER’S EQUITY                
Common stock, $0.001 par value; 100,000,000 shares authorized; 55,992,002 and 48,036,538 shares issued and 51,484,444 and 48,036,538 outstanding at December 31, 2018 and December 31,2017, respectively     51,484       48,037  
Additional paid-in capital     254,989,657       233,055,348  
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at December 31, 2018 and December 31, 2017, respectively)     (9,497,009 )     (3,802,310 )
Accumulated other comprehensive loss     (19,921,258 )     (6,310,763 )
TOTAL STOCKHOLDERS’ EQUITY     225,622,874       222,990,312  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 428,829,264     $ 438,332,844  
                 


   
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)  
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016  
   
    Year Ended  
    December 31, 2018     December 31, 2017     December 31, 2016  
                   
REVENUES FROM UNRELATED PARTY, NET   $ 63,707,518     $ 9,853,410     $ 47,870,589  
REVENUES FROM JV COMPANY AND RELATED PARTY, NET     48,731,310       92,952,211       81,621,424  
                         
REVENUES, NET     112,438,828       102,805,621       129,492,013  
                         
COST OF GOODS SOLD     (92,191,383 )     (88,461,432 )     (111,770,197 )
                         
GROSS PROFIT     20,247,445       14,344,189       17,721,816  
                         
OPERATING EXPENSES:                        
Research and development     (10,084,378 )     (27,628,085 )     (26,504,650 )
Selling and marketing     (3,189,022 )     (1,465,007 )     (1,567,707 )
General and administrative     (8,612,393 )     (11,333,336 )     (20,665,709 )
Total Operating Expenses     (21,885,793 )     (40,426,428 )     (48,738,066 )
                         
LOSS FROM OPERATIONS     (1,638,348 )     (26,082,239 )     (31,016,250 )
                         
OTHER INCOME (EXPENSE):                        
Interest income     1,324,812       2,269,844       2,961,153  
Interest expense     (1,871,851 )     (2,280,286 )     (1,831,667 )
Change in fair value of financial instruments     -       -       3,823,590  
Change in fair value of contingent consideration     3,405,864       -       -  
Government grants     17,787,445       5,913,554       25,913,540  
Share of loss after tax of JV     (17,888,706 )     (11,555,302 )     (7,307,510 )
Other income, net     956,839       123,925       1,627,933  
Total other income (expense), net     3,714,403       (5,528,265 )     25,187,039  
                         
INCOME (LOSS) BEFORE INCOME TAXES     2,076,055       (31,610,504 )     (5,829,211 )
                         
INCOME TAX (EXPENSE) BENEFIT     (7,770,754 )     3,263,030       (681,546 )
                         
NET LOSS     (5,694,699 )     (28,347,474 )     (6,510,757 )
                         
OTHER COMPREHENSIVE (LOSS) INCOME                        
Foreign currency translation     (13,610,495 )     13,846,110       (15,415,223 )
                         
COMPREHENSIVE LOSS   $ (19,305,194 )   $ (14,501,364 )   $ (21,925,980 )
                         
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC     51,188,647       47,943,830       47,447,665  
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED     51,188,647       47,943,830       47,447,665  
                         
NET LOSS PER SHARE, BASIC   $ (0.11 )   $ (0.59 )   $ (0.14 )
NET LOSS PER SHARE, DILUTED   $ (0.11 )   $ (0.59 )   $ (0.14 )
                         


   
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOW  
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016  
   
    Year Ended  
    December 31,
2018
    December 31,
2017
    December 31,
2016
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net loss   $ (5,694,699 )   $ (28,347,474 )   $ (6,510,757 )
Adjustments to reconcile net income to net cash provided by operating activities                        
Depreciation and amortization     4,326,296       4,777,992       4,863,277  
Assets impairments     263,185       170,506       (40,142 )
Allowance for doubtful accounts     (213,809 )     128,972       -  
Deferred taxes     4,815,774       (5,448,015 )     3,651,362  
Change in fair value of financial instruments     -       -       (3,823,590 )
Share of loss after tax of JV Company     17,888,706       11,555,302       7,307,510  
Reserve for fixed assets     (52,744 )     451,503       -  
Change in fair value of contingent consideration     (3,405,864 )     -       -  
Stock compensation cost     285,609       5,191,307       14,913,212  
                         
Changes in operating assets and liabilities, net of effects of acquisition:                        
(Increase) Decrease In:                        
Accounts receivable     (57,503,289 )     (5,821,522 )     (40,962,889 )
Deferred taxes assets     375       -       -  
Notes receivable     483,778       -       1,383,605.00  
Notes receivable from JV Company and related party     6,231,669       8,068,968       -  
Inventories     (5,243,388 )     (3,311,357 )     4,952,792  
Other receivables and other assets     (31,373,831 )     (1,243,552 )     (43,650,395 )
Due from employee     1,045       10,127       41,529  
Advances to supplier and prepayments and prepaid expenses     (5,386,448 )     23,107,334       (9,209,955 )
Advances to suppliers-long term     -       (5,941,692 )     -  
Amount due from JV Company     (95,442,739 )     (53,622,842 )     (111,996,250 )
Amount due from JV Company-Longterm     15,907,183       (15,907,183 )     -  
Due from related party     159,405       10,622,123       28,715,113  
                         
Increase (Decrease) In:                        
Accounts payable     137,390,139       66,784,385       112,150,789  
Other payables and accrued liabilities     60,736,669       1,914,293       (3,790,859 )
Notes payable     (30,542,040 )     (13,297,993 )     (8,480,858 )
Customer deposits     (104,047 )     155,100       (48,312 )
Income tax payable     822,422       1,221,012       1,008,274  
Deferred income     (761,736 )     (4,431,765 )     -  
Net cash provided by (used in) operating activities   $ 13,587,621     $ (3,214,471 )     (49,526,543 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                        
Purchases of property, plant and equipment, net     (582,872 )     (760,253 )     (275,801 )
Purchases of land use rights and other intangible assets     (103,871 )     (416,361 )     (3,388 )
Acquisition of Jinhua An Kao (net of cash received)     (3,555,766 )     -       -  
Acquisition of SC Autosports     486,954       -       -  
Purchases of construction in progress     (418,755 )     (702,719 )     (6,001,664 )
Reimbursement of capitalize interests for construction in progress     1,790,652       -       -  
Repayment of notes receivable     -       -       10,335,807  
Long Term Investment     1,436,217       -       -  
Short term investment     -       4,587,971       (3,088,327 )
Net cash (used in) provided by investing activities   $ (947,441 )   $ 2,708,638       966,627  
                         
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Proceeds from short-term bank loans     32,503,855       32,263,794       65,912,237  
Repayments of short-term bank loans     (33,259,759 )     (35,667,772 )     (35,815,325 )
Repayments of long-term bank loans     (302,361 )     -       -  
Proceeds from notes payable     54,348,577       22,270,028       12,038,765  
Repayment of notes payable     (58,588,036 )     (28,680,591 )     -  
Warrant exercise     -       -       434,666  
Net cash (used in) provided by financing activities   $ (5,297,724 )   $ (9,814,541 )     42,570,343  
                         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH     7,342,456       (10,320,374 )     (5,989,573 )
Effect of exchange rate changes on cash     (1,099,881 )     1,237,572       (1,727,697 )
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR     16,110,496       25,193,298       32,910,568  
                         
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD     22,353,071       16,110,496       25,193,298  
                         
SUPPLEMENTARY CASH FLOW INFORMATION                        
Income taxes paid     2,056,670       1,448,523       2,598,846  
Interest paid     1,708,766       1,625,240       1,671,372  
                         
SUPPLEMENTAL NON-CASH DISCLOSURES:                        
Construction in progress transferred to Property, Plant and equipment     74,118,229       -       -  
Long term and short term Advances to suppliers transferred to Construction in progress     31,301,325       18,848,586       -  
Purchase of construction in progress by accounts payable     -       3,756,605       4,191,246  
Advances to suppliers-long term adjusted for other payable     -       1,065,100       -  
Settlement of due from JV Company and related parties with notes receivable from related parties     86,461,386       53,565,297       43,707,157  
Settlement of accounts receivables with notes receivable from unrelated parties     60,543,404       5,868,902       15,052,339  
Settlement of other receivables with notes receivable from related parties     34,015,662       -       -  
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable     31,347,383       5,868,902       14,509,390  
Assignment of notes receivable from JV Company and related parties to supplier to settle accounts payable     77,107,835       44,812,574       44,846,561  
Assignment of notes receivable from unrelated parties to supplier to settle other payable     28,636,652       -       -  
Assignment of notes receivable from JV Company and related parties to supplier to settle other payable     34,242,433       -       -  
Settlement of accounts payable with notes payables     31,039,932       31,533,939       8,146,783  
Acquisition of Jinhua An Kao by stock     20,718,859       -       -  
Acquisition of SC Autosports by stock     756,664       -       -  
Replacement of notes payables with accounts payable     10,582,651       -       -  
Amount due from JV Company converted to investment in JV Company     82,393,493       -       -  
Reversal of construction in progress and accounts payable     8,029,198       -       -  
Construction in progress transferred back to prepayments     -       -       35,035,762  
Reclassification of overpaid accounts payable to advances to suppliers     16,826       -       -  
Deferred tax changed to other comprehensive income     -       78,967       -