Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q3 2023 Earnings Call Transcript

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q3 2023 Earnings Call Transcript November 8, 2023

Operator: Greetings, and welcome to the Kandi Technologies Third Quarter 2023 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kewa Luo. Kewa, you may begin.

Kewa Luo: Thank you. Hello, everyone. Thank you all for joining us on today’s conference call to discuss Kandi’s results for the third quarter 2023. Earlier today, we issued a press release covering the results. You can find the press release on the company’s website as well as for Newsewire services. On the call with me today are Mr. Xiaoming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Ms. Alan Lim, Chief Financial Officer. Dr. Dong will deliver prepared remarks in Chinese, which I will then translate. After that, we will have a Q&A session. Before we continue, please note that today’s discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, the company’s actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company’s public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Dr. Xueqin Dong. Go ahead, Dr. Dong.

Xueqin Dong: [Foreign Language] Hello, everyone. Welcome to our conference call today. I will begin to discussing some of the highlights in the third quarter in the wake of our successful transformation from a loss to a profit in the first half of 2023. Our continued profitability this quarter underscores the positive outcomes we have gained from our product transformation initiatives. These profitable operations serve as a testament to the strategic adjustments we have made in recent years, which have paved the way for our success in the fully electric off vehicle market. Through the collective efforts of all employees, our company achieved a cumulative net income of approximately $6.3 million during the first 3 quarters with diluted earnings per share of $0.08. This marks a significant improvement compared to the net loss of approximately $2.4 million or diluted loss per share of $0.03 for the same period in 2022?

Xueqin Dong: [Foreign Language] Our subsidiary, SC Autosports finished the acquisition of the Northern Group. This further enhanced our sales pipeline by leveraging their extensive sales expertise and distribution channels. The strategic move enabled us to further solidify our position in the market, as demonstrated by our recently announced partnership with Rural King, a giant in the American farming and home retail industry, they are helping us expand by working with more stores, delivering our products with a broader customer base.

Xueqin Dong: [Foreign Language] In addition, we recently displayed our new fully electro vehicles at the Midas Renderos [ph] a trade show that facilitates vendors access to a large and influential network of independent farm, ranch and home retailers. We received positive feedback and further enhanced our presence across various distribution channels. Moreover, to foster SC Autosports marketing capabilities. In the third quarter, we purchased a 75,000 square foot shipping center in Texas, which is now off plating. This move will significantly boost our marketing capabilities in the United States.

Xueqin Dong: [Foreign Language] As we look forward to 2024, our primary focus remains to expand our presence in the North American market. With Kands commitment to innovation and quality, we are positioned to meet the increasing demand for fully electric off-road vehicles, unlocking substantial growth potential and capitalizing on opportunities. Additionally, we are committed to entering global markets and are confident that our production and sales in 2024 will experience substantial growth compared to the current year.

Xueqin Dong:

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Q&A Session

Operator: [Foreign Language] Now we will move on to the Q&A session. [Operator Instructions] Our first question comes from Michael Pfeffer of Oppenheimer and Company. Michael please proceed.

Michael Pfeffer: Hi. Thanks for taking my question. A lot of Wall Street pundits have been warning U.S. investors away from China stocks as well as electric automakers, likely the cause of Kandi’s poor stock action in these last few months in spite of consecutive impressive jumps in quarterly performance in reality from a purely operational cash management view, management looks brilliant in both selling its legacy Jinwa facility for $60 million cash profit plus a government subsidy to build a new replacing facility and selling its China-based EV auto, JV Fengsheng, interest a former partner Geely for an additional $40-plus million profit, both just as the COVID-epidemic began slowing China’s economy. The JV sale to Geely looks particularly smart since Fengsheng has not shown up in the China media for years and seems to now have been terminated. Maybe you can just translate that and get to my questions.

Xueqin Dong: [Operator Instructions] Okay. My question to management is to confirm or reject a theory that should clearly set Kandi apart from both the EV and China investor concerns mentioned before. The theory is Kandi with its new direction away from EV autos back to its decades ago, export legacy off-road business is in the best of both worlds, particularly since it no longer does have – no longer does have to rely on the internal sales in China. Kandi is a conglomerate manufacturing in-house, 90% of all parts for its electric fleet, including chassis, body parts, motors, lithium batteries and BMS in China where the economy and deployment has slowed along with multiyear lows on commodities like copper on rare earth minerals then ships to vehicles on containers also at multiyear low prices to the U.S. where the economy is much better, and there is a significant demand for low-cost electric transportation.

It is no wonder Kandi CEO has predicted gross margins in the 38% area. If you could just translate that then. — to small mall

A – Unidentified Company Representative: [Foreign Language] We will now be conducting a question-and-answer session. If you would like to iron keypad. A confirmation tone will indicate your line is in the question queue. — you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starts. One moment, please, while we poll for questions.

Xueqin Dong: Does management agree with the stated observation? Is Kandi aggressively attempting to expand its global exposure? And if so, which markets do you expect to add over the next 12 months?

A – Unidentified Company Representative: I have one more after that, but I’d like to hear his answer to that.

Xueqin Dong: [Foreign Language]