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

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q4 2023 Earnings Call Transcript March 15, 2024

Kandi Technologies Group, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Kandi Technologies Fiscal Year 2023 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kewa Luo, Investor Relations Manager for Kandi Technologies. Thank you. You may begin.

Kewa Luo: Thank you, Melissa. Hello, everyone. Thank you all for joining us on today’s conference call to discuss Kandi’s results for the full year 2023. Yesterday, we issued a press release covering the results. You can find the press release on the company’s website as well as from newswire services. On the call with me today are Mr. Xiaoming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Mr. 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: Hello, everyone. I’m Xueqin Dong, the CEO of Kandi Technologies Group. Welcome to today’s conference call. Looking back on the challenges of 2023, I am very proud of the success we achieved through our strategic pivot into off-road or electric vehicles and associated parts. 2023 was a landmark year for us as we developed and launched new products such as electric UTVs and electric mini golf karts. We beefed up our sales channels by acquiring Northern Group and expanding collaboration with Lowe’s. At Lowe’s, we grew our partnership by partnering more of their super centers and dealers, thereby expanding our coverage of North America. In 2023, we returned to profitability with revenue hitting its highest level of the past three years.

Gross profit increased by 112% to $40.4 million, and we achieved a net profit of $1.7 million, a huge swing from the $12.9 million net loss in 2022. These achievements laid a solid foundation for our future growth, strengthening our belief in the potential of the electric off-road vehicle market. As we look to 2024, our enhanced focus on research and development will enable us to introduce more competitive or electric off-road vehicle products. This strategy shows our confidence in the company’s future growth and is a pledge to boost shareholder value by addressing the growing demand for electrified off-road vehicles, we are confident we can achieve significant growth in 2024, which can translate into greater value for our customers and shareholders.

We hope our strategic shifts are understood and supported by you, our shareholders. Now we will move on to the Q&A session. Chairman, Hu Xiaoming 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 question. Operator, please go ahead.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Mike Pfeffer with Oppenheimer & Company. Please proceed with your question.

Mike Pfeffer: Good morning. A couple of quick comments and then a couple of quick questions, please. In January, according to the Kandi American Facebook page, Mr. Hu came to the U.S. and with senior management and first visited the PGA Expo where Kandi got Coleman Lowe’s and its first 10,000 golf cart orders in 2022. Kandi was honored by the Expo as an innovator with its patented expandable mini cart by the NBC Golf Channel. Afterwards, he went on to meet with Lowe’s home office management to plan Kandi’s expansion for this year and beyond. Maybe you can just translate that quickly, please. A few weeks later, another message came up on the Facebook page announcing that Kandi was invited to present its current line of golf carts, cowboys side by side, e-bikes, et cetera, at Lowe’s annual all-hands manager meeting.

From the looks of the video on the Facebook page, it appeared that Kandi was given the largest and prime location in the display hall and from pictures was inundated by Lowe’s managers. Not surprising since Kandi has the highest priced products sold by Lowe’s and managers’ bonuses are based on the dollar volume of sales of their store. Here are a few questions. Maybe you can just translate that and I’ll go to the questions quickly. Since Lowe’s has now worked with Kandi for over a year, can Mr. Hu give us any color on just how big this Lowe’s relationship can evolve?

Xiaoming Hu: We are glad that our products are popular among the customers of Lowe’s. This shows that our cooperation with Lowe’s for more than in the past year has been pleasant. As our cooperation between the two parties continue to expand and deepen, on top of the golf carts that we are currently selling, there will be other products will continue to be sold in the retail stores of Lowe’s. We believe that our cooperation with Lowe’s will continue to expand and deepen.

Mike Pfeffer: As compared to Walmart, which at least for now does not seem to stock the carts locally, Lowe’s seems to have a rotating inventory in the store of various Kandi products. What are the payment terms that Kandi has with the various chains, primarily, Lowe’s and Walmart?

Xiaoming Hu: Please note that the payment terms we have with Lowe’s or Walmart and some other super stores are confidential. But what we can say is all the payment terms are certainly following the terms agreed upon by both parties.

Mike Pfeffer: Okay. How many more super store chains over and above the five who currently know, does Mr. Hu think Kandi will add over the next 12 months? And how many outlets are involved?

Xiaoming Hu: So for this year, on top of what we are working with the Lowe’s superstores, we have now added the corporation with more than a dozen or so of the retail chains with different scales. Currently, we are working on the child sales in those superstores. In addition, on top of the cooperation of the supermarket, we are working with the dealership with more than 300 partnerships during the 2023. And in this upcoming 2024, we are trying to work with more than 1,000 dealerships in the U.S. market.

Mike Pfeffer: Thanks. It appears that a few states, including Texas, have not yet approved the Kandi Cowboy side-by-side for sale. Can you tell us what the holdup is and when it may be released?

Xiaoming Hu: Regarding the sales plans, like what kind of products or the time line, it’s based on the sales plan with our partners and is working accordingly. Currently, our cowboy products is selling based on our selling plan.

Mike Pfeffer: Thank you. Last question. In 2023, it appears that Kandi sales at the big box stores were mainly golf carts, what new products are being introduced this year and then next year?

Xiaoming Hu: So on top of the golf carts, we will gradually launch different other — the highly competitive electric off-road vehicle series. On top of that, we’re going to launch the lithium batteries for different kind of utilizations. Moreover, we are planning to develop the electric for the fourth quarter.

Mike Pfeffer: Thank you.

Operator: Our next question comes from the line of Arthur Porcari with Corporate Strategies. Please proceed with your question.

Arthur Porcari: Okay, can you hear me?

Xiaoming Hu: Yes, I can hear you.

Arthur Porcari: All right. At the last bullish November conference call, Kandi traded at $3.40 a share, at that time as a premium to its reported $2.89 per share in cash in CDs. A few days ago, it traded below $2.30, just above its 52-week low. I said bullish based on the CFO’s response in that question last report, regarding the announced purchase of Kandi’s second 75,000 square foot distribution assembly facility in Garland, Texas, which increased the total capacity to 125,000 square feet. In the PR, they announced that, the — one of your people say, Kandi American tends to drive growth through geographic penetration across the U.S. with this and additional distribution centers. This will likely be key to fueling demand in a timely and quarterly effective manner.

That was a quote out of that. Let me follow it a little bit here. A shareholder follow-up question went on to ask, is it safe to assume with this added capacity reached over the next two years, the revenues could approach $500 million, and that was the question. The CFO’s response was, “the purpose of purchasing the new warehouse in Garland, Texas is to increase our sales capacity.” Our sales in the state will definitely increase in a more significant manner. Go ahead and pass that on to him right now. Okay. He went on to say, this is a quote out of it, our goal of sales target is estimated to be close to $500 million within the next two to three years. He also said, “it is estimated that the gross profit margins for the whole year 2023 would be above 30%.