Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q4 2022 Earnings Call Transcript

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q4 2022 Earnings Call Transcript March 15, 2023

Operator: Hello and welcome to Kandi Technologies Full Year 2022 Financial Results Conference Call and Webcast. As a reminder this conference is being recorded. It is now my pleasure to turn the call over to the Kewa Luo, Manager, Investor Relations. Please go ahead, Kewa

Kewa Luo: Thank you, operator. Hello, everyone. Thank you all for joining us on today’s conference call to discuss Kandi’s results for the full year 2022. Earlier today, we issued a press release covering the results. You can find a press release on the conference website as well as from newswire services. On the call with me today are Mr. Xiao Ming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Dr. Dong will be delivered 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, Xueqin Dong. Go ahead, Dr. Dong.

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Xueqin Dong: Hello, everyone. I’m Xueqin Dong, CEO of Kandi. Today, our Chairman, Mr. Xiao Ming Hu, and CFO, Alan Lim, and myself are all here to share Kandi’s financial results for 2022 with you. Thank you very much for joining today’s conference call. Our total revenue for the full year of 2022 was approximately $118 million. Results were impacted by the strategic adjustments to our product structure over the past two years as well as the pandemic. This drove a loss of approximately $12.9 million in 2022. However, if we exclude 2021 onetime gain of $66.2 million from the disposal of long-term assets and equity transfer, this is actually a significant improvement. As we enter 2023, our balance sheet is healthy with a cash balance of approximately $232 million.

This lays a good foundation for our future development. To cope with the challenges of the pandemic and the oversupply of EVs in China that is causing intense competition, we shifted our focus to off-road vehicles. We have used our unique electric vehicle technology to form a more diversified and flexible business model. This resulted in healthy revenue growth for us while reducing potential losses in the electric vehicle market. Moving forward, we will cater to the evolving needs of our clients. We will collaborate closely with our partners, drive innovation in fully electric off-road vehicles and deliver exceptional customer service. Our deep knowledge and expertise in full electric technology equips us with a solid foundation to gain a competitive advantage in the market of fully electric off-road vehicles.

Over the past two years, our company has undergone a strategic adjustment period and faced the unprecedented challenge of the pandemic, resulting in losses. Nevertheless, as our revised strategy begins to take shape, I am confident that we will soon turn the tide. I am eager to make meaningful contributions to Kandi’s success and growth. Now we will move on to the Q&A session. Chairman, Hu Xiao Ming and I will answer your questions. and Ms. Kewa and Mr. Alan Lim will provide translation for English questions. Please go ahead and ask your questions.

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Q&A Session

Operator: Our first question is coming from Mark Canal from a private investor.

Unidentified Analyst: Yes. Good morning, everybody, and thanks for the terrific results you presented. I have a question that is out of three questions. As discussed on the last conference call, it appears the long-awaited 300,000 government accredited Uber-like rideshare program has started to wake up. International government finally approving Kandi built K23 for full highway use now being licensed under the partner with certified China automaker Hengrun. Now my three questions from Mr. Hu’s statement on this subject at the last conference call, it appears that Kandi will be paid for providing the parts required for Hengrun to manufacture this EV. When Mr. Hu says parts, how many parts it can be providing? About how much in parts revenue can Kandi receive for each vehicle built? Maybe start with first.

Kewa Luo: All right. Thank you for your question.

Xueqin Dong: So first of all, thank you for your question. So, what we previously we’re providing the whole set of the vehicle for the assembly parts, in which we will obtain more than 95% of the revenue of each piece of the vehicle.

Unidentified Analyst: Well, that sounds a great number. Then my next two questions is, it appears Kandi 23 is being built in Kandi’s Hainan facility bought by Hengrun. Is that correct? And if so, whose employees are being used at the facility? Do you anticipate any new models being built in the rideshare company? And if so, will they also be built under the Hengrun licenses Kandi provided all of the parts? And then last question. On the last conference call, Mr. Hu said, we basically get all the income generated from the completed steps of these parts to sell to Hengrun. Does he really mean that Kandi provide all the parts or just major parts like motor batteries — battery management systems and so on?

Kewa Luo: Got it. Thank you.

Xueqin Dong: So, as for the question related to the work process, so all the parts and manufacturing for the components are taking place in Hainan of our company, whereas Hengrun is responsible for the final assembly for the vehicle. That’s how we work together in the corporation. If a new model is going to be developed, our plan is to cooperate with Hengrun under the current situation. And as for the parts that we are manufacturing, yes, we’re actually manufacturing and providing all the parts, including the engines, the motors, the batteries and other parts, is all done — the part is all done by Kandi.

Unidentified Analyst: Great. Thank you, for taking my question. And keep on good work. And I can see the shipment that’s coming into the U.S. the UTVs, it looks terrific these days. So just keep on the good work and talk to you on the next conference call then. Thank you.

Kewa Luo: Thank you.

Xueqin Dong: Thank you.

Operator: Our next question is coming from Mike Pfeffer from Oppenheimer. Michael, I cannot hear you. Are you on mute?

Mike Pfeffer : Thank, for taking my question. On the last conference call, Mr. Hu said, so regarding the production conditions for the K32 off-road trucks, we have been refining the whole production workflow in the past few months. And right now, we are capable of the full and mass productions. While investors are getting a lot of feedback on golf carts. We’ve heard very little on this really good-looking truck. Though this truck is fully equipped as a plug-in electric, sales in the low $30,000 level, somewhat similarly equipped Ford F-150 would sell at more than twice that price, around $75,000. While we know the top speed is around 65 miles per hour and up to 130-mile range, would think though not yet approved for general highway use, this would be a real big seller under farm truck license exemptions, which are variable in most agricultural states. And maybe just pass that on to Mr. Hu. I have two quick questions after that.