Q4 2022 Kandi Technologies Group Inc Earnings Call

Speaker 2: Hello and welcome to the CANDI Technologies Full Year 2022 Financial Results Conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation.

Speaker 2: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kiwa Lo, Manager of Vesta Relations. Please go ahead, Kiwa.

Speaker 3: Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss Candice results for the full year 2022. Earlier today, 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.

Speaker 3: On the call with me today are Mr. Xiaoming Hu, Chairman of the Board, Dr. Xue Qingdong, Chief Executive Officer, and Mr. Alan Ling, Chief Financial Officer. Dr. Dong will deliver prepared remarks in Chinese.

Speaker 3: which I will then translate. After that, we will have a Q&A session.

Speaker 3: Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Hopper provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

Speaker 3: 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 obligations.

Speaker 3: to update any forward-looking statement, except as required under applicable law.

Speaker 3: Please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars.

Speaker 3: With that, let me now turn the call over to our CEO , Xueqing Dong. Go ahead, Dr. Dong.

Speaker 4: OK. Ready? Thank you. I am the CEO of the company. Today, I am going to introduce you to the CEO of CFO Inc. He is the CEO of the company that is currently in the market. He is the CEO of the company that is currently in the market. Go on.

Speaker 3: Hello everyone, I'm Xuexing Dong, CEO of Candy. Today our Chairman Mr. Xiaoming Hu and CFO Alan Ling and myself are all here to share Candy's financial results for 2022 with you. Thank you very much for joining today's conference call.

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Speaker 4: Like So that's it for today. Please like and subscribe. See you next time.

Speaker 4: If you have the other questions, the voicemail channel is posted there. That's it. Thank you.

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Speaker 3: Our total revenue for the full year of 2022 was approximately $118 million.

Speaker 3: Results were impacted by the strategic adjustments to our product structure over the past two years as well as the pandemic.

Speaker 3: These drove a loss of approximately 12.9 million in 2022. However, if we exclude 2021's one-time gain of $66.2 million from the disposal of long-term access and equity transfer, this is actually a significant improvement.

Speaker 3: 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.

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Speaker 3: 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 economy.

Speaker 3: and flexible business model. This resulted in healthy revenue growth for us while reducing potential losses in the electric vehicle market.

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Speaker 3: 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.

Speaker 3: Our deep knowledge and expertise in fully electric technology equips us with a solid foundation to gain a competitive advantage in the market of fully electric off-road vehicles.

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Speaker 3: We will continue to do so. Over the past two years, our company has undergone a strategic adjustment period and faced the unprecedented challenge of the pandemic, resulting in losses.

Speaker 3: 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 Candy's success and growth.

Speaker 4: Now we will move on to the Q&A session. There is no volume there.

Speaker 3: Chairman Hu Xiaoming and I will answer your questions. And Ms. Kewa and Ms. Ailong will provide translation for English questions. Please go ahead and ask your question.

Speaker 2: Thank you. We'll now be conducting your question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker 2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment please while we poll for questions.

Speaker 2: Our first question is coming from Mark Canal from a private investor your line is now live.

Speaker 5: Yes, good morning everybody and thanks for the terrific results you presented.

Speaker 5: 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 U-BOLIKE ride share program has started to wake up. Is the national government finally approving Kandy build K-23 for full highway use?

Speaker 5: now being licensed under the partner certified China automaker Henggu.

Speaker 5: I'm gonna take questions now.

Speaker 5: a From mr. Who statement on this subject at the last conference call it appears that candy will be paid for providing the part We've cried for hang grew to manufacture this easy

Speaker 5: But mr. Who says pop

Speaker 5: How many parts is Kandy providing? About how much in parts revenue can Kandy receive for each vehicle built?

Speaker 5: Okay.

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Speaker 6: So, first of all, thank you for your question. So what we did is 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.

Speaker 5: Wow, that sounds a great number. And then my next two questions is, it appears KND 23 is being built in KND's Hainan facility, but by Hangrud, 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?

Speaker 5: And if so, will they also be built under the Hangar license, which can be provided all of the parts? And then last question, on the last comment, the call is to who said, we basically get all the income generated from the completed steps of this part?

Speaker 5: to sell to Hengoo. Does he really mean that Kandy provides all the parts or just major parts like motor batteries?

Speaker 5: battery management systems and so on.

Speaker 1: and so on.

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Speaker 7: Thank you.

Speaker 6: So as for the question related to the work process, so all the parts and the manufacturing for the components taking place in the high end of our company.

Speaker 6: whereas HanREN is responsible for the final assembly for the vehicle. That's how we work together in the cooperation. If a new model is going to be developed, our plan is to cooperate with HanREN under the current situation.

Speaker 6: And as for the parts that we are manufacturing, yes, we are actually manufacturing and providing all the parts including the engines, the motors, the batteries and all the parts. The part is all done by Candy.

Speaker 8: Great.

Speaker 5: Thank you for taking my question and keep on good work. I can see the shipment that's coming into the US, it looks terrific these days. So just keep on the good work and talk to you on the next conference call. Thank you. Thank you. Thank you.

Speaker 2: Thank you. Next question is from

Speaker 9: So.

Speaker 10: Okay, so if we want to.

Speaker 2: Hi Michael, I cannot hear you.

Speaker 11: Thanks 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.

Speaker 11: And right now we are capable of the full…

Speaker 11: Right now we are capable of the full and mass productions.

Speaker 11: 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, sells on the low $30,000 level, it's a very good looking truck.

Speaker 11: somewhat similarly equipped Ford EF150 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, one would think, though not yet approved for general highway use, this would be a rural big seller under farm truck.

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Speaker 3: I think that the Chinese government is very interested in the development of the Chinese government. I think that the Chinese government is very interested in the development of the Chinese

Speaker 3: I hope that you will continue to learn more about the future of the government. I hope that you will continue to learn more about the future of the government. I hope that you will continue to learn more about the future of the government.

Speaker 11: Go ahead with your question. Thank you. What specifically did Mr. Who mean by his quote?

Speaker 11: I mentioned above and by referring to candy being now capable of full mass production.

Speaker 11: If this is true, is he referring to the truck being produced as an LSEV or is he inferring that he soon expects it to be cleared for full NHTSA registration?

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Speaker 4: Thank you everyone for the excellent work yeah during today's webinar

Speaker 6: So, as for your question, our current model, the K32, is developed according to the standards for the farm vehicles under the U.S. Transportation Department, which belongs to the category of low-speed vehicles, or you can say the LSEV.

Speaker 6: that cannot be utilized on the high road. So yeah, we categorize our K32 as LSEV.

Speaker 11: Okay, and just last question as an alternate course, what would be Mr. Who's thoughts regarding my comment?

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Currently, actually, the K32 is in the phase of the past marketing in the US market. And your comments are highly consistent with our thoughts. We believe that once the customers get to understand and try out our cars, they will know the performance, the experience that can lead to a larger market.

in the US side. Thank you. And thanks for your comment. Thank you. Our next question today is coming from Arthur Porcari from Corporate Strategies. What is that like?

Good morning all. Well, I'm going to change my thing around a little bit. I'm surprised we haven't gotten the 10K announced yet. So, I'm going to...

ask a few questions on basic products first, and then I want to ask a few more questions about these results we just came in with.

But let's get back to the product situation. So with a couple of comments, followed by some questions on golf carts. As mentioned in Candy's Q1-22-10Q made public on May 22nd, we saw the following quote. On February 22nd, 2022, I see all the sports in Coleman Power Sports.

signed an MOU regarding the sale of 5,000 candy carts, golf carts valued at 29 million. Also in the same SEC filing a few days later, another MOU was signed on March 3rd with a group of more than 20 dealers and that was put down to be valued at about $39 million for another 5,000.

While both were mentioned in the 10K PR and SEC filing, which didn't come out until May, several months later, there was never a PR dedicated to either of these, which likely could be Candy's largest EV contracts to date. And also to date, Candy has never publicly identified to the public the Coleman cards were primarily for Lowes Corp, one of the nation's largest big box store chains.

that prominently showcases the candy cars with a Coleman front plate. And they put them outside the front entrance. Mine actually has seven of them right now. They started with two and they've been selling them and I guess it's because I'm down here in the south. But considering there's 2,400 Lowe's stores. Ah!

potential looks great there. Go ahead and pass that on to them. I got one more comment to make and I'll get into my questions.

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amount called for for these first two accounts alone.

A few weeks after that, shareholders saw a second PR where Coleman not only extended its contract for an additional $4,800,

with a value of $28 million, which is about equal to the full order for 2022. However, are all to be delivered in just Q123 and the sharing of best Q1 ever likely be reported in May. With this said, I then have a few questions.

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Go ahead, Mark. Okay. All right. Anyway, as was mentioned in the last conference call, I'm sure you all are aware that there is a logistical service called ImportKey that any shareholder, any analyst, anybody would like to subscribe to.

which gives a tremendous amount of detail on container shipping as it's coming out of China into the United States, like 41 columns with everything imaginable, what's in there, how many pieces are in, and so on. Anyway, with that available to us, and we talked again in the last conference call tonight, it appears here that the question at the time was...

When you announced the 10,000 golf carts being surpassed with the company's press release, at that time the import key had only shown that 7,500 carts were imported to the United States. So a logical inference could be that Candy is now selling these golf carts in China or other countries. Can management confirm or at least explain the difference?

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The other model, the company that owns the villa, this term is a nexorn product that makes Vul CA area dangerous. So, first question, during in November 2022, The company announced that

our high land base has produced more than aggregate of 10,000 pieces of a crossover golf cart. At that time, 7,000 of the golf carts already arrived in the United States, whereas the remaining 3,000 were in transit to the States.

During 2022, our golf carts are primarily sold to the United States, with small portion of sales in China.

And that explains the variants that you mentioned. Okay, fine. From the last conference call, there was a question about AGM batteries, which were currently in the golf carts. I was asked whether Candy was, I think you mentioned that you were not making the AGM batteries, but you would be.

changing over shortly to lithium and at that point in time, Candy would be providing the batteries. Can you explain a bit regarding the timing? And since Candy has its own high-end battery subsidiary, and also what parts of the golf cart does Candy make? Candy might need to deploy 5 customers in order to Des distinctly

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Well, that's great news. I mean, we have a great battery division already anyway. Looking forward to seeing the 10K, see how that's continuing to improve. One more area in the golf carts, and then I want to talk a little bit again about the numbers.

Okay, and for 2023 it appears we now have a six passenger golf cart and even more impressive, something that I would certainly use where I am, would be a two passenger golf cart with a really nice lift bed in the back, I guess a hydraulic lift bed in the back and a 3500 pound lift bed in the middle.

winch in the front. These seem to be new models for the year and they're already being advertised in the United States by a company called Safer Wholesale. And I believe they're just within the past week. I think Lowe's has now put them on their set websites as well.

I guess they appear to be about as far as the two passenger and the lift.

bed in the back and all that seems to sell for about the same price just under $10,000 in lows and

I think that's around $10,999. I think that's what Safer Wholesale is selling that one for. Also, it's kind of interesting. They've got different colors. They even have some camos now with that neck on the front. It's great for hunters that want to sneak up on their bow.

on what they are hunting for. Anyway, just go ahead and see if we have a question in there. I'm sorry, what's your question? Can you finish your question? I'm sorry, I got carried off. My question basically was, well I guess...

Some of it got pretty much answered on the last, actually it wasn't a question for me, I'm actually responding back to the answer he made. So let's talk about something else here now. On these numbers, you said that we had seven, at that time you put out that press release of seven thousand.

had already been sold to the United States and that was still back if I remember right the end of November . How many carts did we

deliver for all of 2022. I'm sure it will probably show up when the numbers show up. They're not here yet, so for the benefit.

for all of 2022. I'm sure it'll probably show up when the numbers show up. They're not here yet, so for the benefit of everybody here, how many golf carts do we actually...

that got booked in 2022. So your question is, since 2022 November , how many golf carts have we sold till today? For 2022. All of 2022. How many were sold for all of 2022? Okay, have- Absolutely.

How many were made? Both? In 2022. Right. Okay. Okay.

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So, we have two parts of the cells. One is the intercompany cells between our high net and our US subsidiary, SC. For that part, we sold roughly 10,000 pieces of the golf carts from our China and then US subsidiaries. The next part, we sold roughly 10,000 pieces of the golf carts from our China and then US subsidiaries.

And for the US sales under the SE companies, we have roughly 7,000 during 2022.

So you're saying you've done 17,000 units in 2022? 7,000. 7,000 pieces of it. I already said 10,000 plus 7,000.

Oh, the 10,000 as I mentioned, we have two parts, right? One is the sales amount of China to SE. Of course, that will be eliminated in our consolidated financials, but we want to show that how our internal operations stand for, right? So 10,000 is from our high-end facilities to SE.

and then $7 is really selling to the external customers.

I know we have on the book. Well, at that time also actually, even prior to that November , we already got the new contract, I guess from.

of Coleman for another 4800 units, but this time, it's there for the whole year, it was only for the one quarter. Is that correct?

I'm sorry, R. Say it one more time. What I was saying is that you got that additional contract that was announced by the company for 4,800 units.

for Coleman, but only for the to be delivered in the first quarter. I guess my two-part question on that is will it all be delivered in the first quarter at $4,800 and if so what would that bring the total up to total sales through the first quarter. I realize the first quarter's not over yet, but I mean.

you have expectations to do, let's say, another, at least the 5,000 in the first quarter? And if so, how much more??"

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So we expect that the sales of the golf cart vehicles to our end customers, our extended customers, are roughly 3,000 pieces of the golf cart during the first quarter.

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Yeah, so you are correct. So by the end of the Q1 of this year, roughly aggregate of 10,000 pieces of the golf cards will be delivered to our external customers.

Yeah, so you are correct. So by the end of Q1 of this year, roughly an aggregate of 10,000 pieces of the golf cards will be delivered to our external customers. OK.

What about for the full year? Do you think, if you give us any type of, what's your target goal right now based on what you see on the horizon? I think, if you give us any type of target goal right now based on what you see on the horizon,

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So for the fiscal year 2023, we expect the sales during this year, roughly 20 to 25,000 pieces of the golf carts will be sold in the US market. Because we have more in-depth discussion and cooperation with Lowe's directly, so that can facilitate the sales to jump up in this year.

So, for your answer, there will be 20 to 25,000 pieces of the golf cart to be sold in this year. That's great. That's an incredible number. That will put you probably as either number two or three in golf cart sales in the United States in your second year. That's great news, I guess, for us.

At what point in time is the actual sale booked on our books? Like you've delivered stuff to SC. If it hasn't been brought out to the end user, I guess it doesn't book then.

So even though 10,000 were effectively done and shipped, I guess up to the end of last year, you only booked 7,000 of it. So what point does that actually happen?

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when the end user, it's not like plus 90

Are they billed immediately like when you're dealing with a lag time when you're dealing with somebody as big as Lowe's? I don't get your question. Allen probably does. As far as us getting paid, are the sales...

plus how many days we get actually paid, right? Right, right.

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So, for our current cooperative common, we actually have the advance payment on them for ourselves. But as for the cooperation with Lowe's, the credit terms will be roughly six days, primarily.

Six days, that's excellent. Yes, 60 days, that's correct. Okay, let me wrap this up over here then. Obviously the loss in the quarter was a bit surprising, but again, I'm sure it will be clarified in the 10K, because Mr. Hughes made it very clear, why he didn't want to compete in the overall business of EVs, is he's not going to compete in something he's going to lose money at.

So I would have to believe that with the strong addition of this new product line in the fourth quarter, there must have been something else that was written off or such.

Hello? Hello, hello, I'm here. Yes. What's your question? Did you not hear me? Just a minute, somebody was trying to call me. Okay, let me try this again. Okay, I'm going to try this again.

Mr. Hu has made it very clear that he does not like to get in a business that he loses money and that's why he even though he's a big first mover in the industry, he decided to, in the EV industry, he decided to look for other sources for the time being. So the fact we took this sizable loss in the fourth quarter leads me to believe there must have been some sort of special write down or something that caused it.

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And I'm going to see you there. So actually, if you look at our financial statement, you know, for the last three quarters, we have roughly, you know, a three million of the net loss. So the net loss, we have the whole year is roughly 12.8 million. So that's

sell from other fixed assets for this year. That's why we have such a net loss incurred for the whole year.

Of course you can be first to our...

So I guess we'll find something to add later on Yeah plus you may consider the shutdown of China, especially November and December There is a high peak of Covid injection in the Chinese markets That's why that has some impact to the operations as well but I believe that's over so it'd be better upcoming.

That's right. Okay. Well, anyway, it's great to hear about the 22,000 to 25,000 units expected for this year. I'd say that's quite a number in this industry.

That's right, okay. Well anyway, it's great to hear about the 22,000 to 25,000 units expected for this year. I'd say that's quite a number in this industry and a good job by all that managed to get that done.

Next year we have the same annual meeting. I think it'll be a lot different picture for everyone. Thank you very much. Appreciate hard work and I'll pass from here on Thank you Thank you for your time. Thank you for your time.

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Thank you.

Yes, we have time for one more question. Thank you. Our next question is coming from Frances Forte, a private investor. Your line is now live. Thank you. Candy announced two important agreements in October of 2020, and I would like to know the current status of each of them.

The first one is the strategic agreement with State Grid, EV services company, to cooperate on Cubex.

is the strategic agreement with State Grid EV services company to cooperate on QBEX on battery exchange.

And the second one is the agreement with CITIC Securities to initiate the process of doing an IPO on the CANDI smart battery swap.

agreement with CITIC Securities to initiate the process of doing an IPO on the Candy Smart Battery Swell Company.

subsidiary company on the tech exchange, the Star Exchange. What is the status now of both of those agreements please?

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So for the current market, for the EV market in China, certain electric vehicle companies, they have seized the market share at that huge loss expense. So our company thinks that as long as the market has not reached a certain level of success,

the state of the healthy and elderly development is not too wise to participate in this kind of competition with our own financial cost. That's why we try to just wait until the conditions in the EV market become more healthy.

Thank you very much.

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Well, let's put it this way. It's not really on hold per se, but it's programmed slowly. Then right now, we primarily just focus in the market of high net.

Okay. So it's going slow. And in this coming year, we plan to have one or two more locations to be added in our better swap process that the amount may be not.

Okay, and is CITIC investments still committed?

National Internet Alliance raise money upon international Asia for innovation walls location internationalblades Since the

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back over to Kiwa at this time.

Thank you, operator. Thank you again for attending today's conference call. If you have any more questions, please feel free to contact Blue Shirt or us directly via the email IR at KNDgroup.com. We look forward to updating you on our next conference call. This concludes our call for today.

Thank you. You may now all disconnect. Thank you. That does conclude today's conference and webcast. You may now disconnect your lines and have a wonderful day. Thank you for your participation.