Kandi Technologies Reports Third Quarter 2018 Financial Results

Globe Newswire 9-Nov-2018 7:03 AM

- Q3 revenue increased 34.0% yoy to $38.0 million -
- Q3 gross profit increased 29.2% yoy to $6.2 million -

JINHUA, China, Nov. 09, 2018 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the "Company," "we" or "Kandi") (NASDAQ GS: KNDI), today announced its financial results for the third quarter of 2018.

Third Quarter Financial Highlights

  • Total revenues were $38.0 million for the third quarter of 2018, an increase of 34.0% from total revenues of $28.4 million for the same period in 2017.             
  • Electric Vehicle ("EV") parts sales increased by 18.7%, to $32.1 million for the third quarter of 2018, compared with EV parts sales of $27.0 million for the same period in 2017.             
  • Gross profit increased by 29.2% to $6.2 million, compared to $4.8 million for the same period last year.
     
  • Kandi Electric Vehicles Group Co., Ltd. (the "JV Company") sold 1,502 units of EV products in the third quarter of 2018.
  • GAAP net loss for the third quarter of 2018 was $6.5 million, or loss of $0.13 per fully diluted share compared with GAAP net income of $1.9 million, or income of $0.04 per fully diluted share for the same period in 2017.
  • Non-GAAP adjusted net loss1, which excludes stock award expenses and the change of the fair value of contingent consideration, was $5.0 million in the third quarter of 2018, compared with non-GAAP net income of $2.9 million for the same period in 2017. Non-GAAP adjusted loss per share1 was approximately $0.10 per fully diluted share for the third quarter of 2018, compared with Non-GAAP adjusted income per share1 of $0.06 per fully diluted share for the same period in 2017.
  • Working capital deficit was $12.2 million as of September 30, 2018. Cash, cash equivalents and restricted cash totaled $10.4 million as of September 30, 2018.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi, commented, "EV sales were impacted in the third quarter due to the JV Company's new EV models awaiting MIIT's approval to be included in the Directory of Recommended Models for Energy Saving and New Energy Vehicle Demonstration and Promotion, as well as approval of purchase tax exemption. Additionally, a large increase in the research and development expense caused a decline in net profits in the third quarter. However, we are happy to announce that the JV Company's new EV models obtained all required approvals from MIIT for both Directory of Recommended Models for New Energy Vehicles and the Tax Exemption on September 19, 2018, and are now available for sale on the market. With the launch of the new EV models, the Company's operations are forecasted to improve. The management team remains confident in enhancing Kandi's brand name and competitive edge through its consumer favored EV products."

Net Revenues and Gross Profit

3Q18   3Q17   Y-o-Y%  
Net Revenues (US$million) $38.0   $28.4   34.0%  
Gross Profit (US$million) $6.2   $4.8   29.2%  
Gross Margin 16.4%   17.0%   -  

Net revenues for the third quarter of 2018 increased by 34.0% compared to the same period of last year. The increase in revenue was mainly due to the increase in EV parts and off-road vehicles sales during this quarter. The selling prices of our products for the three months ended September 30, 2018 decreased on average from the same period last year. The increase in revenue was primarily due to the increase of sales volume.                      

Operating Income (Loss)

3Q18   3Q17   Y-o-Y%  
Operating Expenses (US$million) $8.7   $3.1   182.1%  
Operating (Loss) Income (US$million)   ($2.4)   $1.8   -237.4%  
Operating Margin   -6.4%     6.2%   -  

Total operating expenses in the third quarter of 2018 were $8.7 million, compared with $3.1 million in the same quarter of 2017. The increase in total operating expenses was due to the increased R&D expenses, which were $5.7 million in this quarter compared with $0.7 million in the same quarter last year.

GAAP Net Income (Loss)

  3Q18   3Q17   Y-o-Y%  
Net (Loss) Income  (US$million) ($6.5)   $1.9   -440.0%  
(Loss)Earnings per Weighted Average Common Share ($0.13)   $0.04   -  
(Loss)Earnings per Weighted Average Diluted Share ($0.13)   $0.04   -  
Stock Award Expenses(US$million) $0.03   $1.0   -96.9%  
Change in the Fair Value of Contingent Consideration(US$million) $1.6   -   -  
Non-GAAP Net (Loss) Income (US$million) ($5.0)   $2.9   -267.5%  

Net loss was $6.5 million in the third quarter of 2018, compared with net income of $1.9 million in the same quarter of 2017. The decrease of net income for this quarter was primarily attributable to the loss from the JV Company and increased R&D expenses this period as compared to the same period of last year.

Non-GAAP net loss was $5.0 million in the third quarter of 2018, compared to Non-GAAP net income of $2.9 million in the same quarter of 2017. The decrease of net income (non-GAAP) was primarily attributable to the loss from the JV Company and increased R&D expenses this period as compared to the same period of last year.

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

In the third quarter of 2018, the JV Company sold 1,502 units of EV products.

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

3Q18   3Q17   Y-o-Y%  
Net Revenues (US$million) $19.9   $86.2   -76.9%  
Gross Income (US$million) $3.1   $5.3   -41.5%  
Gross Margin 15.8%   6.1%   -  
Net loss (US$million) ($5.9)   ($0.5)   1080.0%  

Revenue for the JV Company was $19.9 million in the third quarter of 2018, a decrease of 76.9% compared to the same quarter of 2017. Net loss was $5.9 million, a 1080.0% increase in the loss compared to the same quarter of 2017.

Kandi's investments in the JV Company are accounted for using the equity method of accounting because Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company's losses of $2.9 million for this quarter. After eliminating intra-entity profits and losses, Kandi's share of the after-tax loss of the JV Company was $3.2 million for the third quarter of 2018.

Third Quarter 2018 Conference Call Details

The Company has scheduled a conference call and live webcast to discuss its third quarter 2018 financial results at 8:00 A.M. Eastern Time (9:00 P.M. Beijing Time) on November 9, 2018. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Mr. Mei Bing, 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:

  • Toll-free dial-in number: +1-800-263-0877
  • International dial-in number: + 1-646-828-8143
  • Webcast and replay: http://public.viavid.com/index.php?id=132150

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, Zhejiang Province, is engaged in the research and development, manufacturing and sales of various vehicle products. Kandi has established itself as one of China's leading manufacturers of pure electric vehicle ("EV") products (through its joint venture), EV parts and off-road vehicles. Kandi conducts its primary business operations through its wholly-owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. ("Kandi Vehicles"), SC Autosports, LLC – previously Sportsman Country, LLC, and the partially and wholly-owned subsidiaries of Kandi Vehicles. 

More information about Kandi can be viewed at the Company's corporate website at http://www.kandivehicle.com. The Company routinely posts important information on its website. http://www.kandiev.com.

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 securities laws, the Company does not assume a duty to update these forward-looking statements.

Follow us on Twitter: @ Kandi_Group
Company Contact:

Ms. KewaLuo
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)
 
 
    September 30,
2018
    December 31,
2017
 
    (Unaudited)        
Current assets            
Cash and cash equivalents   $ 1,342,085     $ 4,891,808  
Restricted cash     9,104,584       11,218,688  
Accounts receivable (net of allowance for doubtful accounts of $319,421 and $133,930 as of September 30, 2018 and December 31, 2017, respectively)     40,111,173       34,397,858  
Inventories (net of provision for slow moving inventory of $662,769 and $620,919 as of September 30, 2018 and December 31, 2017, respectively)     15,676,683       15,979,794  
Notes receivable     72,817       -  
Notes receivable from JV Company and related party     2,184,519       1,137,289  
Other receivables     1,233,460       2,650,668  
Prepayments and prepaid expense     6,662,684       6,536,839  
Due from employees     6,668       7,070  
Advances to suppliers     8,794,653       14,908,385  
Amount due from JV Company, net     77,386,193       146,422,440  
Amount due from related party     -       162,048  
TOTAL CURRENT ASSETS     162,575,519       238,312,887  
                 
LONG-TERM ASSETS                
Property, Plant and Equipment, net     83,664,992       12,000,971  
Land use rights, net     11,848,966       12,666,047  
Construction in progress     -       53,083,925  
Deferred taxes assets     3,294,885       4,383,425  
Long Term Investment     -       1,460,034  
Investment in JV Company     146,272,731       70,681,013  
Goodwill     28,583,528       322,591  
Intangible assets     4,491,080       331,116  
Advances to suppliers     -       21,592,918  
Other long term assets     6,168,533       7,590,734  
Amount due from JV Company, net     -       15,907,183  
TOTAL Long-Term Assets     284,324,715       200,019,957  
                 
TOTAL ASSETS   $ 446,900,234     $ 438,332,844  
                 
CURRENT LIABILITIES                
Accounts payables   $ 111,376,786     $ 111,595,540  
Other payables and accrued expenses     6,065,379       6,556,209  
Short-term loans     30,583,267       33,042,864  
Customer deposits     214,079       205,544  
Notes payable     24,663,846       28,075,945  
Income tax payable     471,184       2,902,699  
Due to employees     34,070       35,041  
Deferred income     1,353,819       2,191,143  
Total Current Liabilities     174,762,430       184,604,985  
                 
LONG-TERM LIABILITIES                
Long term bank loans     28,981,286       30,737,547  
Contingent liability     12,204,964       -  
Other long-term liability     681,768       -  
Total Long-Term Liabilities     41,868,018       30,737,547  
                 
TOTAL LIABILITIES     216,630,448       215,342,532  
STOCKHOLDER'S EQUITY                
Common stock, $0.001 par value; 100,000,000 shares authorized; 55,989,502 and 48,036,538 shares issued and 51,481,944 and 48,036,538 outstanding at September 30, 2018 and December 31,2017, respectively     51,482       48,037  
Additional paid-in capital     254,980,909       233,055,348  
Retained earnings (the restricted portion is $4,422,033 and $4,422,033 at September 30,2018 and December 31,2017, respectively)     (5,221,190 )     (3,802,310 )
Accumulated other comprehensive loss     (19,541,415 )     (6,310,763 )
TOTAL STOCKHOLDERS' EQUITY     230,269,786       222,990,312  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 446,900,234     $ 438,332,844  
                 


 
KANDI TECHNOLOGIES GROUP, INC.
AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) 
(UNAUDITED)
 
    Three Months Ended     Nine Months Ended  
    September 30,
2018
    September 30,
2017
    September 30,
2018
    September 30,
2017
 
                         
REVENUES FROM UNRELATED PARTY, NET   $ 14,860,034     $ 6,604,109     $ 32,211,352     $ 10,720,595  
REVENUES FROM JV COMPANY AND RELATED PARTY, NET     23,135,326       21,749,790       30,479,521       49,233,156  
                                 
REVENUES, NET     37,995,360       28,353,899       62,690,873       59,953,751  
                                 
COST OF GOODS SOLD     (31,753,311 )     (23,522,406 )     (53,044,861 )     (50,697,990 )
                                 
GROSS PROFIT     6,242,049       4,831,493       9,646,012       9,255,761  
                                 
OPERATING EXPENSES:                                
Research and development     (5,691,649 )     (657,851 )     (7,091,836 )     (26,569,624 )
Selling and marketing     (898,896 )     (216,351 )     (1,875,294 )     (976,913 )
General and administrative     (2,070,947 )     (2,196,201 )     (5,534,039 )     (12,074,147 )
Total Operating Expenses     (8,661,492 )     (3,070,403 )     (14,501,169 )     (39,620,684 )
                                 
(LOSS) INCOME FROM OPERATIONS     (2,419,443 )     1,761,090       (4,855,157 )     (30,364,923 )
                                 
OTHER INCOME (EXPENSE):                                
Interest income     52,745       619,923       1,452,522       1,709,990  
Interest expense     (483,376 )     (598,523 )     (1,505,409 )     (1,761,786 )
Change in fair value of contingent consideration     (1,552,686 )     -       1,814,326       -  
Government grants     607,008       474,950       717,821       5,804,561  
Share of (loss) income after tax of JV     (3,247,343 )     444,181       (79,592 )     (13,455,786 )
Other income (expense), net     15,735       (6,560 )     666,294       143,617  
Total other (expense) income, net     (4,607,917 )     933,971       3,065,962       (7,559,404 )
                                 
(LOSS) INCOME BEFORE INCOME TAXES     (7,027,360 )     2,695,061       (1,789,195 )     (37,924,327 )
                                 
INCOME TAX BENEFIT (EXPENSE)     505,961       (776,985 )     370,316       4,130,951  
                                 
NET (LOSS) INCOME     (6,521,399 )     1,918,076       (1,418,879 )     (33,793,376 )
                                 
OTHER COMPREHENSIVE (LOSS) INCOME                                
Foreign currency translation     (8,108,270 )     4,032,652       (13,230,652 )     8,942,931  
                                 
COMPREHENSIVE (LOSS) INCOME   $ (14,629,669 )   $ 5,950,728     $ (14,649,531 )   $ (24,850,445 )
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC     51,474,048       48,028,467       51,089,047       47,913,028  
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED     51,474,048       48,028,467       51,089,047       47,913,028  
                                 
NET (LOSS) INCOME PER SHARE, BASIC   $ (0.13 )   $ 0.04     $ (0.03 )   $ (0.71 )
NET (LOSS) INCOME PER SHARE, DILUTED   $ (0.13 )   $ 0.04     $ (0.03 )   $ (0.71 )
                                 

 

 
KANDI TECHNOLOGIES GROUP, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    Nine Months Ended  
    September 30,
2018
    September 30,
2017
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net (loss)   $ (1,418,879 )   $ (33,793,376 )
Adjustments to reconcile net income to net cash provided by operating activities                
Depreciation and amortization     2,271,599       3,556,661  
Assets impairments     78,415       136,936  
Allowance for doubtful accounts     (7,093 )     -  
Deferred taxes     -       (5,596,103 )
Share of income after tax of JV Company     79,592       13,455,786  
Reserve for fixed assets     (53,561 )     -  
Change in fair value of contingent consideration     (1,814,326 )     -  
Stock compensation cost     253,934       5,498,183  
Changes in operating assets and liabilities, net of effects of acquisition:                
(Increase) Decrease In:                
Accounts receivable     (52,845,923 )     (8,926,990 )
Deferred taxes assets     (52,126 )     -  
Notes receivable     491,272       -  
Notes receivable from JV Company and related party     3,196,340       4,923,967  
Inventories     1,555,993       (2,814,129 )
Other receivables and other assets     1,497,230       754,661  
Due from employee     945       (10,766 )
Advances to supplier and prepayments and prepaid expenses     (4,590,404 )     23,878,150  
Advances to suppliers-long term     -       (4,804,200 )
Amount due from JV Company     (81,549,214 )     (33,071,177 )
Amount due from JV Company-long-term     15,907,183       (15,907,183 )
Due from related party     161,874       4,406,105  
Increase (Decrease) In:                
Accounts payable     101,684,965       53,102,716  
Other payables and accrued liabilities     29,845,307       2,173,413  
Notes payable     (12,434,813 )     (3,933,839 )
Customer deposits     20,350       80,057  
Income tax payable     (2,353,826 )     732,405  
Deferred income     (761,643 )     (5,127,455 )
Loss contingency-litigation     -       587,579  
Net cash used in operating activities   $ (836,809 )   $ (698,599 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property, plant and equipment, net   $ (304,745 )   $ (420,037 )
Purchases of land use rights and other intangible assets     (105,480 )     -  
Acquisition of Jinhua An Kao (net of cash received)     (3,610,846 )     -  
Acquisition of SC Autosports (net of cash received)     486,954       -  
Purchases of construction in progress     (425,241 )     (1,565,244 )
Reimbursement of capitalize interests for construction in progress     1,818,390       -  
Long Term Investment     1,458,464       -  
Short term investment     -       4,553,734  
Net cash (used in) provided by investing activities   $ (682,504 )   $ 2,568,453  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from short-term bank loans   $ 25,515,452     $ 24,854,574  
Repayments of short-term bank loans     (26,283,065 )     (27,939,362 )
Repayments of long-term bank loans     (153,523 )     -  
Proceeds from notes payable     40,313,800       13,367,413  
Repayment of notes payable     (43,024,633 )     (14,060,961 )
Net cash used in financing activities   $ (3,631,969 )   $ (3,778,336 )
                 
NET (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH   $ (5,151,282 )   $ (1,908,482 )
Effect of exchange rate changes on cash   $ (512,545 )   $ 1,011,615  
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR   $ 16,110,496     $ 25,193,298  
                 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD   $ 10,446,669     $ 24,296,431  
                 
SUPPLEMENTARY CASH FLOW INFORMATION                
Income taxes paid   $ 1,981,072     $ 1,072,082  
Interest paid   $ 1,274,399     $ 1,164,774  
                 
SUPPLEMENTAL NON-CASH DISCLOSURES:                
Construction in progress transferred to property, plant and equipment   $ 75,266,352     $ -  
Long term and short term advances to suppliers transferred to construction in progress   $ 31,786,196     $ 12,241,736  
Settlement of due from JV Company and related parties with notes receivable   $ 62,549,758     $ 39,197,964  
Settlement of accounts receivables with notes receivable from unrelated parties   $ 49,620,953     $ 1,150,038  
Settlement of other receivables with notes receivable from unrelated parties   $ 930,347     $ -  
Assignment of notes receivable from unrelated parties to supplier to settle accounts payable   $ 20,126,196     $ 1,150,038  
Assignment of notes receivable from JV Company and related parties to supplier to settle accounts payable   $ 57,956,363     $ 33,175,103  
Assignment of notes receivable from unrelated parties to supplier to settle other payable   $ 29,857,070     $ -  
Assignment of notes receivable from JV Company and related parties to supplier to settle other payable   $ 230,284     $ -  
Settlement of accounts payable with notes payables   $ 23,846,161     $ 15,149,150  
Acquisition of Jinhua An Kao by stock   $ 20,718,859     $ -  
Acquisition of SC by stock   $ 756,664     $ -  
Cancellation of notes payables   $ 10,746,580     $ -  
Amount due from JV Company converted to investment in JV Company   $ 83,669,804     $ -  
Adjustment of construction in progress with accounts payable   $ 8,153,573     $ -  
Adjustment of advance to supplier with accounts payable   $ 479,575     $ -  
Deferred tax changed to other comprehensive income   $ -     $ 52,266  
Adjustment of Construction in progress   $ -     $ 1,057,152  
Purchase of construction in progress in accounts payable   $ -     $ 6,244,120  

____________________________
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.

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