JINHUA, CHINA- (November 9, 2016) - Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI) today announced its financial results for the third quarter of 2016.
Third Quarter Highlights
· Total revenues decreased 87.4% to $6.4 million for the third quarter of 2016, compared with $50.5 million for the same period of 2015;
· Electric vehicle (“EV”) parts sales decreased 90.4% to $4.7 million for the third quarter of 2016, compared with $49.0 million in the same period of 2015;
· Kandi Electric Vehicles Group Co., Ltd. (the "JV Company") sold 184 units of EV products, including 159 EV products via the Micro Public Transportation (MPT) program and 25 EV products via its direct sales program, a 96.9% decrease compared to the same period last year;
· GAAP net loss for the third quarter of 2016 was $0.6 million, or $0.01 per fullydiluted share, compared with GAAP net income of $2.3 million, or $0.05 per fullydiluted share in the same period of 2015;
· NonGAAP adjusted net loss, which excludes stock award expenses and changes in the fair value of financial derivatives, was $1.8 million in the third quarter of 2016, compared with nonGAAP adjusted net income of $6.3 million of the same period of 2015. NonGAAP adjusted loss per share1 was approximately $0.04 per fullydiluted share for the third quarter of 2016 compared with NonGAAP adjusted earnings per share of $0.13 per fullydiluted share for the same quarter of 2015; and
· Working capital surplus was $65.5 million as of September 30, 2016. Cash, cash equivalents and restricted cash totaled $17.9 million as of September 30, 2016.
“China’s central government preceded a review on the subsidies paid to all the EV manufacturers, which caused the 2015 subsidy payments remain unpaid industrywide. The delay in subsidy payment heavily impacted the JV Company’s production and sales, which resulted in a significant decrease in our EV parts sales.” commented Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi. “Although our financial performance this year has not matched up to our past success, we have accomplished lots of fundamental work for the business growth in year 2017. First, with the subsidy review in year 2016, after our positive communication with the government, we believe there will be a good outcome soon. There is some misunderstanding with the EV battery exchange model adopted by our end customers to repeatedly and efficiently utilize batteries for the EVs that we manufactured during 2013 and 2014, which was also a challenge to the Company’s further development. Taking the opportunity for clarification with government during the subsidy review, we can clear up this barrier and create a good base for future smooth development. Second, the process of preparing the JV Company to enter into capital markets at the appropriate time and with a strong valuation is on the track as planned; At the same time, we have done lots of work for the JV Company to obtain the vehicles manufacturing license approval in 2017. Finally, we will introduce two new EV models in 2017. Our new models, carefully designed to best serve market needs, will provide a solid foundation for the fast growth in 2017. In addition, in this quarter, we made a significant progress into developing the countrywide EVs distribution network for direct sales. We have also signed the strategic agreement with Qingdao TELD New Energy Co. Ltd. for the Shandong market, and a strategic cooperation agreement with Shanxi Coal Asset Management Group for the Shanxi market, both of which paid us the initial payments in connection with both agreements. ”
“Although the central government will begin reducing the amount of renewable energy subsidies to all EV manufacturers in 2017, the subsidy program itself will continue through 2020. Under the government’s current subsidy policy, we believes the EVs produced and sold by the JV Company meet national renewable energy subsidy requirements and are eligible to receive subsidy payments. Kandi is currently developing the EV products after year 2020, which do not rely solely on subsidy payments and is identifying key areas of focus in which to ensure Kandi’s sustained growth and improve Kandi’s earnings capabilities,” Mr. Hu concluded.
“Due to the delayed government subsidy payments, we have experienced decreased cash flow in the third quarter of 2016, which inevitably impacted the Company’s financial performance in this quarter,” added Mr. Wang Cheng (Henry), Chief Financial Officer of Kandi. “We expect our cash flow and financial position will be improved in the coming quarters once the central government concludes its review and resumes its subsidy payments.”
Net Revenues and Gross Profit
|
|
3Q16 |
2Q16 |
3Q15 |
Q-o-Q% |
Y-o-Y% |
|
Net Revenues (US$mln) |
$6.4 |
$55.2 |
$50.5 |
-88.5% |
-87.4% |
|
Gross Profit (US$mln) |
$0.7 |
$8.5 |
$7.1 |
-92.3% |
-90.9% |
|
Gross Margin |
10.2% |
15.3% |
14.1% |
- |
- |
Net revenues for the third quarter of 2016 decreased 87.4% compared to the same quarter last year. This decrease in net revenues was mainly due to a decrease in EV parts sales. Gross margin was 10.2%, 3.9% lower compared to 14.1% for the same quarter of 2015, which was the result of significant volume drops.
Operating Income (Loss)
|
|
3Q16 |
2Q16 |
3Q15 |
Q-o-Q% |
Y-o-Y% |
|
Operating Expenses (US$mln) |
$1.3 |
$10.8 |
$9.6 |
-88.3% |
-86.7% |
|
Operating Income (Loss) (US$mln) |
($0.6) |
($2.4) |
($2.4) |
- |
- |
|
Operating Margin |
-9.7% |
-4.3% |
-4.8% |
- |
- |
|
Operating Income (Loss) (US$mln) (Non-GAAP) |
($1.8) |
$5.9 |
$4.6 |
- |
- |
Total operating expenses in the third quarter of 2016 were $1.3 million, compared with $9.6 million in the same quarter of 2015. The decrease in total operating expenses was due to a decrease in stock compensation expenses, which were an expense reversal of $1.2 million in this quarter, compared with the stock compensation expenses of $7.0 million in the same quarter last year. Excluding stock compensation expenses, operating expenses in the third quarter of 2016 were $2.5 million, the same in the same quarter last year.
GAAP Net Income
|
|
3Q16 |
2Q16 |
3Q15 |
|
Net Income (Loss) (US$mln) |
($0.6) |
$2.8 |
$2.3 |
|
Earnings (Loss) per Weighted Average Common Share |
($0.01) |
$0.06 |
$0.05 |
|
Earnings (Loss) per Weighted Average Diluted Share |
($0.01) |
$0.06 |
$0.05 |
|
Stock award expenses (expense reversal) |
($1.2) |
$8.3 |
$7.0 |
|
Change of the fair value of financial derivatives |
($0.0) |
($0.5) |
($3.0) |
|
Non-GAAP net income (loss) from continuing operations |
($1.8) |
$10.5 |
$6.3 |
Net loss was $0.6 million in the third quarter of 2016, compared with $2.3 million of net income in the same quarter of 2015. Net income was affected by significant decreases in sales, offsetting this quarter’s decreased stock reward expenses due to weak financial performance.
Non-GAAP net loss was $1.8 million, a decrease of $8.1 million in the third quarter of 2016 compared to $6.3 million of non-GAAP net income in the same quarter of 2015. The decrease in Non-GAAP net income was mainly due to the decrease in revenue in this quarter.
Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”) Financial Results
In the third quarter of 2016, the JV Company sold 184 EV products, a decrease of 96.9% compared to 6,004 EV products sold in the same quarter of 2015.
The condensed financial income statement of JV Company for the third quarter of 2016 is below:
|
|
3Q16 |
2Q16 |
3Q15 |
Q-o-Q% |
Y-o-Y% |
|
Net Revenues (US$mln) |
$11.7 |
$111.8 |
$98.4 |
-89.5% |
-88.1% |
|
Gross Profit (US$mln) |
$5.9 |
$14.7 |
$13.3 |
-59.5% |
-55.4% |
|
Gross Margin |
50.8% |
13.1% |
13.5% |
- |
- |
|
Net Income (Loss) |
($0.4) |
$8.6 |
$1.6 |
- |
- |
|
% of Net revenue |
-3.7% |
7.7% |
1.6% |
- |
- |
Revenue for the JV Company was $11.7 million in the third quarter of 2016, a decrease of 88.1% compared to the same quarter of 2015. Net loss was $0.4 million, a decrease of $2.0 compared to $1.6 million of net income in the same quarter of 2015.
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 net loss or $0.2 million for this quarter. After eliminating intra-entity profits and losses, Kandi’s share of the after-tax loss of the JV Company was $0.3 million for the third quarter of 2016.
Outlook
For the fourth quarter of 2016, Kandi expects net revenues to be in the range of $28 million to $30 million.
The Company also expects the JV Company to deliver 2,000 to 2,200 EV products in the fourth quarter.
This outlook reflects the current view of the management, which is subject to change.
Third Quarter of 2016 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss the Q3 2016 financial results at 8:00 AM (Eastern time) ) (9:00 P.M. Beijing Time) on November 9, 2016. Mr. Hu Xiaoming, Chief Executive Officer of the Company, and Mr. Wang Cheng (Henry), Chief Financial Officer of the Company, will deliver prepared remarks, to be followed by a question and answer session.
The dial-in details for the conference call are as follows:
· TOLL-FREE 1-877-407-3982
· TOLL/INTERNATIONAL 1-201-493-6780
· Webcast and replay: http://public.viavid.com/index.php?id=121787
The live audio webcast of the call can also be accessed by visiting Kandi's investor relations website at http://http://en.kandivehicle.com. An archive of the webcast will be available on the Company's website following the live call.
