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Kandi Technologies Reports Second Quarter 2019 Financial Results

• Q2 total revenues increased 47.6% YoY to $24.1 million   –
• Q2 sales of off-road vehicles increased 506.9% YoY to $5.2 million –
• Q2 gross margin increased to 17.4% compared to 12.6% –

JINHUA, China, Aug. 09, 2019 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), today announced its financial results for the second quarter of 2019.

Second Quarter Highlights

  • Total revenues were $24.1 million for the second quarter of 2019, an increase of 47.6% from total revenues of $16.4 million for the same period in 2018.
     
  • Electric Vehicle (“EV”) parts sales increased by 22.4%, to $19.0 million for the second quarter of 2019, compared with EV parts sales of $15.5 million for the same period in 2018.
     
  • Revenues from sales of off-road vehicles increased by 506.9%, to $5.2 million for the second quarter of 2019, compared with revenues from sales of off-road vehicles of $0.8 million for the same period in 2018.
  • GAAP net loss for the second quarter of 2019 was $7.3 million, or $0.14 loss per fully diluted share, compared with GAAP net income of $1.4 million, or $ 0.03 earnings per fully diluted share for the same period in 2018.
  • Non-GAAP adjusted net loss1, which excludes employee stock compensation expenses and the change in fair value of contingent consideration, was $6.6 million in the second quarter of 2019, compared with Non-GAAP adjusted net income of $2.5 million for the same period in 2018. Non-GAAP adjusted loss per share1 was $0.12 per fully diluted share for the second quarter of 2019, compared with Non-GAAP adjusted earnings per share1 of $0.05 per fully diluted share for the same period in 2018.
  • Working capital was $9.6 million as of June 30, 2019. Cash, cash equivalents and restricted cash totaled $5.2 million as of June 30, 2019.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, “The EV sales in the second quarter was still impacted by the Chinese government’s 2019 national subsidy policy adjustments and the JV Company’s pending restructuring, causing the loss of the JV Company, which resulted in Kandi’s overall loss. However, Kandi’s EV parts and off-road vehicle sales have achieved excellent growth during the second quarter, increasing 22.4% and 506.9%, respectively. The management team is expecting to complete the JV Company’s restructuring by the end of the third quarter.  In addition, we believe that Kandi Electric Vehicles Jiangsu Co., Ltd.’s receipt of the “dual production licenses” as a qualified Pure Electric Vehicle Production Manufacturer is a new breakthrough that may lead to tremendous opportunities in the government-accredited online ride hailing market for Kandi’s EVs. We believe that the JV Company will be able to achieve exciting future growth under Geely’s leadership.”

Net Revenues and Gross Profit

2Q19 2Q18 Y-o-Y%
Net Revenues (US$million) $24.1   $16.4   47.6 %
Gross Profit (US$million) $4.2   $2.1   104.2 %
Gross Margin   17.4 %   12.6 % -  

Net revenues for the second quarter of 2019 increased by 47.6% compared to the same period last year. The increase in net revenues was mainly due to an increase in sales of both EV parts and off-road vehicles during this quarter.

Operating Loss

2Q19 2Q18 Y-o-Y%
Operating Expenses (US$million) $7.2   $4.7   51.2 %
Operating Loss (US$million) ($3.0 ) ($2.7 ) 10.4 %
Operating Margin   -12.2 %   -16.3 % -  

Total operating expenses in the second quarter of 2019 were $7.2 million, compared with $4.7 million in the same quarter of 2018. The increase in total operating expenses was due to increased selling and marketing, as well as general and administrative expenses, which were $0.9 million and $5.6 million in this quarter compared with $0.2 million and $3.9 million in the same quarter last year.

GAAP & Non-GAAP Net Income

2Q19 2Q18 Y-o-Y%
Net (Loss) Income  (US$million) ($7.3 )   $1.4   - 632.4 %
(loss) Earnings  per Weighted Average Common Share ($0.14 )   $0.03   -  
(loss) Earnings  per Weighted Average Diluted Share ($0.14 )   $0.03   -  
Stock Compensation  Expenses $1.2     $1.8   -30.2 %
Change in fair value of contingent consideration ($0.5 )   ($0.7 ) -20.2 %
Non-GAAP Net (Loss) Income ($6.6 )   $2.5   -360.7 %

Net loss was $7.3 million in the second quarter of 2019, compared with net income of $1.4 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, a result of adjustment of the national subsidy policy and the pending restructuring of the JV Company, as well as the increased operation cost of the Company since Hainan facility has been put into production.

Non-GAAP net loss was $6.6 million in the second quarter of 2019, a 360.7% decrease compared to Non-GAAP net income of $2.5 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, a result of adjustment of the national subsidy policy and the pending restructuring of the JV Company, as well as the increased operation cost of the Company since Hainan facility has been put into production.

Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”) Financial Results

The condensed financial income statements of the JV Company in the second quarter are as set forth below:

2Q19 2Q18 Y-o-Y%
Net Revenues (US$million) $2.8   $19.6   -85.6 %
Gross Loss (US$million) ($2.6 ) ($4.7 ) -44.4 %
Net (loss) Income ($10.4 ) $4.8   -318.0 %
% of Net revenue   -366.2 %   24.2 % -  

Revenue for the JV Company was $2.8 million in the second quarter of 2019, a decrease of 85.6% compared to the same quarter of 2018. Net loss was $10.4 million, a 318.0% decrease compared to net income of $4.8 million in the same quarter of 2018.

Kandi’s investments in the JV Company are accounted for using the equity method of accounting. Kandi recorded 43.47%* of the JV Company’s loss of $4.5 million for the second quarter. After eliminating intra-entity profits and losses, Kandi’s share of the after-tax loss of the JV Company was $4.5 million for the second quarter of 2019.

* In March 21, 2019, the JV Company converted a loan of RMB314 million (approximately $46.7 million) from Geely Group last year to equity in order to increase its cash flow. As a result, the registered capital of the JV Company became RMB 2.44 billion (approximately $363.2 million), of which the Company, through Kandi Vehicles (as defined below) owned 43.47% and Geely Technologies Group Co., Ltd. owned 56.53%, respectively,

Second Quarter 2019 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss its second quarter 2019 financial results at 8:00 A.M. Eastern Time (8:00 P.M. Beijing Time) on August 9, 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.  

Dial-in details for the conference call are as follows:

A live audio webcast of the call 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 June, 2019, Geely Group (including its affiliate) holds 56.53%, and Kandi Vehicles holds 43.47% in the JV Company, pending the closing of a transfer of 21.47% of the equity interests in the JV Company from Kandi Vehicles to Geely Group’s affiliate, which will result in Kandi Vehicles holding a 22% equity interest after 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 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 
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
 
    June 30,
2019
    December 31,
2018
 
    (UNAUDITED)        
Current assets
Cash and cash equivalents   $ 3,608,933     $ 15,662,201  
Restricted cash     1,573,992       6,690,870  
Accounts receivable (net of allowance for doubtful accounts of $135,557 and
  $120,010 as of June 30, 2019 and
  December 31, 2018, respectively)
    41,926,724       34,274,728  
Inventories (net of provision for slow moving inventory of $901,110 and
  $840,701 as of June 30, 2019 and December 31, 2018, respectively)
    28,980,722       21,997,868  
Notes receivable     -       72,712  
Notes receivable from the JV Company and related party     1,456,537       3,861,032  
Other receivables     7,936,107       1,264,323  
Prepayments and prepaid expense     10,290,832       11,136,408  
Due from employees     4,208       1,001  
Advances to suppliers     4,874,600       4,705,183  
Amount due from the JV Company, net     60,945,283       67,683,462  
Right - of - use asset     75,205       -  
TOTAL CURRENT ASSETS     161,673,143       167,349,788  
 
LONG-TERM ASSETS
Property, plant and equipment, net     78,839,301       82,045,923  
Land use rights, net     11,603,594       11,749,728  
Deferred taxes assets     -       8,204  
Investment in the JV Company     119,144,892       128,929,893  
Goodwill     28,586,379       28,552,215  
Intangible assets     4,020,363       4,328,127  
Other long term assets     5,286,205       5,865,386  
TOTAL Long-Term Assets     247,480,734       261,479,476  
 
TOTAL ASSETS   $ 409,153,877     $ 428,829,264  
 
CURRENT LIABILITIES
Accounts payable   $ 77,907,803     $ 112,309,683  
Other payables and accrued expenses     5,233,787       4,251,487  
Short-term loans     32,189,466       30,539,236  
Customer deposits     141,678       94,408  
Notes payable     20,258,972       12,787,619  
Income tax payable     330,772       3,471,366  
Due to employees     8,464       28,473  
Deferred income     1,320,147       1,340,605  
Lease liability     76,348       -  
Advance receipts     14,565,369       -  
Total Current Liabilities     152,032,806       164,822,877  
 
LONG-TERM LIABILITIES
Long term bank loans     28,693,778       28,794,136  
Deferred taxes liability     2,776,327       1,711,343  
Contingent liability     6,619,000       7,256,000  
Other long-term liability     -       622,034  
Total Long-Term Liabilities     38,089,105       38,383,513  
 
TOTAL LIABILITIES     190,121,911       203,206,390  
 
STOCKHOLDER’S EQUITY
Common stock, $0.001 par value; 100,000,000 shares authorized; 56,243,102 and
  55,992,002 shares issued and 52,819,441 and 51,484,444 outstanding at June
  30, 2019 and December 31, 2018, respectively
    52,819       51,484  
Additional paid-in capital     259,636,605       254,989,657  
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at June 30,
  2019 and December 31, 2018, respectively)
    (21,224,639 )     (9,497,009 )
Accumulated other comprehensive loss     (19,432,819 )     (19,921,258 )
TOTAL STOCKHOLDERS’ EQUITY     219,031,966       225,622,874  
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 409,153,877     $ 428,829,264  
 


 
KANDI TECHNOLOGIES GROUP, INC. 
AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) 
(UNAUDITED)
 
 
    Three Months Ended     Six Months Ended  
    June 30,
2019
    June 30,
2018
    June 30,
2019
    June 30,
2018
 
 
REVENUES FROM UNRELATED PARTY, NET   $ 20,056,696       $ 11,618,855     $ 36,391,659     $ 17,351,318  
REVENUES FROM THE JV COMPANY AND
  RELATED PARTY, NET
    4,089,534         4,740,751       5,823,031       7,344,195  
 
REVENUES, NET     24,146,230         16,359,606       42,214,690       24,695,513  
 
COST OF GOODS SOLD     (19,944,076 )       (14,301,594 )     (34,876,099 )     (21,291,550 )
 
GROSS PROFIT     4,202,154         2,058,012       7,338,591       3,403,963  
 
OPERATING EXPENSES:
Research and development     (632,590       (642,889 )     (1,170,023 )     (1,400,187 )
Selling and marketing     (899,478 )       (228,173 )     (1,517,481 )     (976,398 )
General and administrative     (5,623,798 )       (3,861,263 )     (7,663,326 )     (3,463,092 )
Total Operating Expenses     (7,155,866 )       (4,732,325 )     (10,350,830 )     (5,839,677 )
 
LOSS FROM OPERATIONS     (2,953,712 )       (2,674,313 )     (3,012,239 )     (2,435,714 )
 
OTHER INCOME (EXPENSE):
Interest income     97,814         456,784       350,218       1,399,777  
Interest expense     (429,355 )       (471,616 )     (868,538 )     (1,022,033 )
Change in fair value of contingent consideration     548,000         686,833       637,000       3,367,012  
Government grants     175,319         15,558       223,043       110,813  
Gain from equity dilution in JV     (24,131 )       -       4,341,259       -  
Share of (loss) income after tax of the JV Company     (4,500,201 )       2,372,696       (14,449,359 )     3,167,751  
Other income, net     (174,597 )       627,582       299,793       650,559  
Total other (expense) income, net     (4,307,151 )       3,687,837       (9,466,584 )     7,673,879  
 
(LOSS) INCOME BEFORE INCOME TAXES     (7,260,863 )       1,013,524       (12,478,823 )     5,238,165  
 
INCOME TAX (EXPENSE) BENEFIT     (57,295 )       361,001       751,193       (135,645 )
 
NET (LOSS) INCOME     (7,318,158 )       1,374,525       (11,727,630 )     5,102,520  
 
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation     (4,915,589 )       (12,587,622 )     488,439       (5,122,382 )
 
COMPREHENSIVE LOSS     (12,233,747 )     $ (11,213,097 )   $ (11,239,191 )   $ (19,862 )
 
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC     52,806,331         51,140,542       52,189,237       50,893,356  
WEIGHTED AVERAGE SHARES OUTSTANDING
  DILUTED
    52,806,331         51,140,542       52,189,237       50,893,356  
 
NET (LOSS) INCOME PER SHARE, BASIC   $ (0.14 )     $ 0.03     $ (0.22 )   $ 0.10  
NET (LOSS) INCOME PER SHARE, DILUTED   $ (0.14 )     $ 0.03     $ (0.22 )   $ 0.10  
 


 
KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
 
 
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2019     2018     2019     2018  
Total shareholder’s equity, beginning balance   $       $       $       $    
 
Common Stock:
Beginning balance     52,581       51,009       51,484       48,037  
Stock issuance and award     238       289       1,335       3,261  
Ending balance     52,819       51,298       52,819       51,298  
 
Additional Paid-in Capital:
Beginning balance     258,377,036       252,154,904       254,989,657       233,055,348  
Stock issuance and award     1,259,569       2,038,476       4,646,948       21,138,032  
Ending balance     259,636,605       254,193,380       259,636,605       254,193,380  
 
Retained Earnings:
Beginning balance     (13,906,481 )     (74,315 )     (9,497,009 )     (3,802,310 )
Net (loss) income     (7,318,158 )     1,374,525       (11,727,630 )     5,102,520  
Ending balance     (21,224,639 )     1,300,210       (21,224,639 )     1,300,210  
 
Accumulated Other Comprehensive Income:
Beginning balance     (14,517,230 )     1,154,477       (19,921,258 )     (6,310,763 )
Foreign currency translation     (4,915,589 )     (12,587,622 )     488,439       (5,122,382 )
Ending balance     (19,432,819 )     (11,433,145 )     (19,432,819 )     (11,433,145 )
 
Total shareholder’s equity, ending balance   $ 219,031,966     $ 244,111,743     $ 219,031,966     $ 244,111,743  
 


 
 KANDI TECHNOLOGIES GROUP, INC. 
 AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 
    Six Months Ended  
    June 30,
2019
    June 30,
2018
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income   $ (11,727,630 )   $ 5,102,520  
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization     4,376,097       1,791,762  
Assets impairments     59,799       341,261  
Allowance for doubtful accounts     15,543       (7,257 )
Deferred taxes     51,275       -  
Share of (loss) income after tax of the JV Company     14,449,359       (3,167,751 )
Gain from equity dilution in JV     (4,341,259 )     -  
Reserve for fixed assets     -       (54,799 )
Change in fair value of contingent consideration     (637,000 )     (3,367,012 )
Stock compensation cost     1,314,408       222,259  
 
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) Decrease In:
Accounts receivable     (16,560,338 )     (36,123,904 )
Deferred taxes assets     -       (53,330 )
Notes receivable     250,593       502,623.00  
Notes receivable from the JV Company and related party     442,223       2,060,755  
Inventories     (7,093,904 )     5,020,163  
Other receivables and other assets     (6,234,801 )     927,544  
Due from employee     (23,540 )     (22,355 )
Advances to supplier and prepayments and prepaid expenses     708,825       (2,626,098 )
Amount due from the JV Company     (4,128,506 )     (39,263,079 )
Amount due from JV Company-Longterm     -       15,907,183  
Due from related party     -       165,614  
 
Increase (Decrease) In:
Accounts payable     387,505       41,319,755  
Other payables and accrued liabilities     7,844,434       25,636,794  
Notes payable     (10,161,233 )     (11,936,770 )
Customer deposits     46,806       75,010  
Income tax payable     (2,134,722 )     (1,837,147 )
Deferred income     (22,838 )     (779,240 )
Net cash used in operating activities   $ (33,118,904 )   $ (165,499 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net     (512,707 )     (122,407 )
Purchases of land use rights and other intangible assets     -       (107,917 )
Acquisition of Jinhua An Kao (net of cash received)     -       (3,694,275 )
Purchases of construction in progress     -       (48,042 )
Reimbursement of capitalize interests for construction in progress     -       1,860,287  
Long Term Investment     -       1,492,162  
Advance receipts of equity transfer     14,740,783       -  
Net cash used in investing activities   $ 14,228,076     $ (620,192 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans     17,541,532       14,764,553  
Repayments of short-term bank loans     (15,920,046 )     (14,764,553 )
Repayments of long-term bank loans     (147,408 )     (157,070 )
Proceeds from notes payable     -       34,702,510  
Repayment of notes payable     -       (40,349,566 )
Net cash provided by (used in) financing activities   $ 1,474,078     $ (5,804,126 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED
  CASH
    (17,416,750 )     (6,589,817 )
Effect of exchange rate changes on cash     246,604       (30,020 )
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
    5,182,925       9,490,659  
-CASH AND CASH EQUIVALENTS AT END OF PERIOD     3,608,933       1,612,459  
-RESTRICTED CASH AT END OF PERIOD     1,573,992       7,878,200  
 
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid     1,199,807       1,815,156  
Interest paid     868,538       848,232  
 
SUPPLEMENTAL NON-CASH DISCLOSURES:
Long term and short term Advances to suppliers transferred to Construction in progress     -       28,158,299  
Settlement of due from the JV Company and related parties with notes receivable from related parties     11,055,587       36,310,747  
Settlement of accounts receivables with notes receivable from unrelated parties     8,859,211       39,932,517  
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable     8,682,321       12,570,974  
Assignment of notes receivable from the JV Company and related parties to supplier to settle accounts payable     5,623,609       35,176,703  
Assignment of notes receivable from the JV Company and related parties to supplier to settle other payable     7,429,355       -  
Settlement of accounts payable with notes payables     20,502,956       19,480,843  
Acquisition of Jinhua An Kao by stock     -       20,718,859  
Replacement of notes payables with accounts payable     2,800,749       10,994,880  
Amount due from the JV Company converted to investment in the JV Company     -       85,602,991  
Reversal of construction in progress and accounts payable     -       8,299,226  
Reclassification of overpaid accounts payable to advances to suppliers     -       3,703,808  
 

1Non-GAAP measures, including Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change in fair value of contingent consideration and the effects of stock compensation 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.