JINHUA, CHINA-- (March 16, 2017) - Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ GS: KNDI), today announced its financial results for the full year ended December 31, 2016.
Full Year 2016 Highlights
·Total revenues were $129.5 million in 2016, a decrease of 35.6% from total revenues of $201.1 million in 2015.
·EV parts sales decreased by 38.8% to $120.1 million in 2016, compared with EV parts sales of $196.1 million in 2015.
·Off-road vehicles sales increased by 13.5% to $5.7 million in 2016, compared with off-road vehicle sales of $5.0 million in 2015.
·Kandi Electric Vehicles Group Co., Ltd. (The “JV Company”) sold 10,148 EV products in 2016, compared to 24,220 EV products sold in 2015. Total EV products sales included 4,766 EV products sold to the Micro Public Transportation (“MPT”) program and 5,382 EV products sold through distribution channels under our direct sales program.
·GAAP net loss in 2016 was $6.5 million, or $0.14 loss per fully diluted share, compared with GAAP net income of $14.7 million, or $0.31 per fully diluted share, in 2015.
·Non-GAAP adjusted net income[1], which excludes stock award expenses and changes in the fair value of financial derivatives, was $4.6 million in 2016, compared with non-GAAP adjusted net income of $28.5 million in 2015. Non-GAAP adjusted earnings per share1 was approximately $0.10 per fully diluted share for the full year of 2016, compared with non-GAAP adjusted earnings per share of $0.61 per fully diluted share for the same quarter of 2015.
·Working capital surplus was $86.3 million as of December 31, 2016. Cash, cash equivalents and restricted cash totaled $25.2 million as of December 31, 2016.
“2016 was a challenging year for us. Compared to the all-time high EV sales we recorded in 2015, our net sales and profitability decreased in 2016. This decrease was the result of confusionsurrounding EVs manufactured and sold by the JV Company during 2013 and 2014 that used the reusable battery exchange model. These issues have since been properly resolved after the several conversations with the relevant regulatory authorities. Although the Chinese government’s EV subsidy review has now been finalized, it had a negative effect on our business in 2016. However, despite these setbacks, the Company has continued to put forth its best efforts to improve its products and its business. We are also excited about progress that we have made in the recent quarters,” commentedMr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi.
“First, Kandi’s wholly-owned subsidiary Kandi Hainan received a second subsidy payment of RMB 100 million (approximately USD 14.5 million) in November 2016 from the Hainan Provincial Government for research and development expenditures for a new EV model. The subsidy payment is a strong indicator of the Hainan government’s generous support for our Hainan EV project. Second, in December 2016, we received the final results of the Chinese government’s subsidy review for renewable energy vehicles. According to the results, EVs that were manufactured by the JV Company in 2015, 2016, and later will remain eligible for the same amount of government subsidies as previously anticipated. Third, in the first quarter of 2017, the JV Company’s two Global Hawk EV models, JL7001BEV18 (Kandi Model K11) and SMA7001BEV25 (Kandi Model K17), have been included in 2017’s first and second Directories of Recommended Models for Energy Saving and New Energy Vehicle Demonstration and Promotion issued by the Chinese Ministry of Industry and Information Technology. We believe that our inclusion in these directories has laid a solid foundation for Kandi’s business growth in 2017. Fourth, our wholly-owned subsidiary Yongkang Scrou successfully launched its next generation advanced drive motor, which achieves higher output efficiencies and rated power at roughly the same cost of production. The JV Company expects to purchase more than 20,000 next generation drive motor units from Yongkang Scrou in the second half of 2017. The new motor will help enhance our product capabilities and increase its competitive advantages while maintaining effective cost controls.”
“The Company’s recent form 8-K reports certain financial reporting issues identified by the Company’s management for the full years 2014 and 2015 and the first three quarters of 2016. The Company will, include the restatement to its previously issued financial statements in the annual report on Form 10-K for the fiscal year ended December 31, 2016, which restatements will include separate audited financial statements for the JV Company. The restatements will have no effect on the net income of the Company as previously reported.”
“Going forward, we are confident with the continued support of our investors, we will be able to focus on innovation and regain our leading market position,” Mr. Hu concluded.
Full Year 2016 Financial Results
Net Revenues and Gross Profit
Net revenues for the full year 2016 decreased 35.6% from 2015. The decrease in net revenues was mainly due to the decrease of sales volume. Gross margin for the full year 2016 decreased to 13.7%, compared with 14.1% in 2015. The moderate decrease of gross margin was due to less profitable off-road vehicles sales this year.
Operating Income (Loss)
Total operating expenses in 2016 were $48.7 million, compared with $32.4 million in 2015. The significant increase in total operating expenses was due to significantly increased research and development costs for Hainan’s new EV model development.
GAAP Net Income
Net loss in 2016 was $6.5 million, compared with net income of $14.7 million in 2015. The decrease in net income was primarily attributable to decreased revenue and gross profits, the JV Company’s net losses, and significantly increased research and development expenses to help prepare the Company for future business growth.
JV Company Financial Results
In the fourth quarter 2016, the JV Company sold 2,764 EV products. For the full year 2016, the JV Company sold 10,148 EV products, a 58.1% decrease from 2015. Total EV product sales comprised 4,766 EV products through the MPT program and 5,382 EV products through our direct distribution channels.
The condensed financial income statement of the JV Company for the full year 2016 is as set forth below:
Kandi’s investments in the JV Company are accounted for under the equity method of accounting, as Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company’s loss for $7.1 million for the full year 2016. After eliminating intra-entity profits and losses, Kandi’s share of the after tax loss of the JV Company was $7.3 million for the full year 2016.
Full Year 2016 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss the financial results at 8:00 AM (U.S. Eastern time) on March 16, 2017 (8:00 PM Beijing time on March 16, 2017). Mr. Hu Xiaoming, the Company’s Chief Executive Officer and Mr. Mei Bing, the Company’s Chief Financial Officer, will deliver prepared remarks, followed by a question and answer session.
The dial-in details for the conference call are as follows:
• Toll-free dial-in number: +1 877-407-3982
• International dial-in number: +1 201-493-6780
• Webcast and replay: http://public.viavid.com/index.php?id=123367
A live audio webcast of the call may also be accessed by visiting Kandi's Investor Relations website at http://www.kandivehicle.com. An archive of the webcast will be available on the Company's website following the live call.