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Kandi Technologies (KNDI) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribing – Nov 9, 2021 at 4:30PM

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KNDI earnings call for the period ending September 30, 2021.

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Kandi Technologies (KNDI -2.47%)
Q3 2021 Earnings Call
Nov 09, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to the Kandi Technologies third quarter 2021 financial results call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kewa Luo. Please go ahead.

Kewa Luo -- Investor Relations

Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss Kandi's results for the third quarter of year 2021. Earlier today, we issued a press release covering the results.

You can find a press release on the company's website as well as from newswire services. On the call with me today are Mr. Hu Xiaoming, chief executive officer; and Mr. Alan Lim, chief financial officer.

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Mr. Hu 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 Form 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, Hu Xiaoming.

Go ahead, Mr. Hu.

Xiaoming Hu -- Chief Executive Officer

[Foreign language] Kewa?

Kewa Luo -- Investor Relations

Thank you, Kewa. Hello, everyone, and welcome to our conference call today. I'm happy to share our business and the financial results for the third quarter. The most important highlight of the quarter with the impressive growth of revenue in the electric scooter, electric self-balancing scooter, and associated parts line of business.

This segment accounted for nearly 40% of total quarterly sales, growing approximately 600% over the same period last year. These strong results reflect the strategic initiatives we undertook a year ago when COVID was depressing the EV market. We looked for opportunities with big addressable markets in which we could leverage our core capabilities. The scooter business was a great fit, and we directed substantial resources to quickly pursue it.

Our results today testify to the wisdom of this approach.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Leading consultants, we can be a company estimate that by 2030, the micro-mobility market, including e-scooters and electric self-balancing scooters will reach annual sales of 200 to $300 billion in the United States alone. Entering this segment was always in our strategic plan, but the COVID crisis accelerated both our entry and the growth of the industry because they reduce contact points and encourage social distancing, micro-mobility vehicles such as e-scooters, and electric self-balancing scooters or a natural and less risky alternative to the public transportation such as local buses and subways amid public transportation shutdowns during the cover, demand became urgent for micro-mobility vehicles and associated parts.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Moreover, the flexibility and simplicity of micro-mobility vehicles means that this mode of transportation can rebound faster than others. In the third quarter, when Delta variant regional outbreaks were occurring around the world, we saw the strategic advantage of pursuing this opportunity in e-scooters and electric self-balancing scooters and associated parts.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Looking at other lines of business, battery tax sales decreased, which impacted overall sales of electric vehicle parts. We were constrained by supply chain tension affecting the whole industry and by the restructuring of off-shore EV business. Off-road vehicle sales declined versus last year, but were up 25% sequentially, accounting for more than 40% of total revenue. Consumer demand for off-road vehicles, including ATV, UTV, and other models is increasing.

We mentioned last quarter that our analysis of market interest in high-performance electric score will drive UTVs led us to develop the model K32. The K32 is an intelligence fully enclosed pure electric four-wheel drive multipurpose UTV. Prototypes of the K32 was delivered to the U.S. for display last month, and initial feedback from dealers was positive.

We plan to formally launch the K32 soon.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Looking at our financial position. In the third quarter, we received the final payment from Geely of our sale of 22% position in the functional joint venture. At the end of the quarter, we had working capital of about 289 million, the best liquidity status in our history. This level of liquidity capital opens many new opportunities for us.

So we boosted our R&D spending in the third quarter. Restructuring and recovery of our pure EV and related businesses will take time. But we believe that as we finish the reset of these businesses, our electric vehicles and EV associated product line will again achieve solid growth. A recovery in EV combined with the strong growth of e-scooters and huge potential for off-road vehicles makes us excited and confident about our future.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Let's now start the Q&A session. Kewa will take any English questions and translate for me. And our CFO, Alan will answer in English. Operator, please go ahead.

Questions & Answers:


Operator

[Operator instructions] First question today comes from Frank Blatterman, who is a private investor. Please go ahead.

Frank Blatterman -- Private Investor

My two questions involve the EV part of Kandi's business. Number one, is the factory on Hainan Island presently active in making cars? And if so, how many employees are actually making cores there? Question number two, the K23 and K27 were originally introduced to the United States over a year ago, but personally can only be sold its neighborhood electric vehicles with a reduced maximum speed. Have they been upgraded and approved for highway travel in the U.S. at this time? Are they presently in production? When do you expect them to be shipped? Will it be before the end of the year?

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

[Foreign language]

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Alan Lim -- Chief Financial Officer

So first of all, thank you so much for your questions. As for the first question, as person, the production of the EV product is still being adjusted and fine tuned our factory. As you may know, in the past few years, the electric vehicles produced by Kandi, we have used the Geely's production clarification. Since this year, we completely withdrew from the cooperation with Geely, and we tried to you looking for other partnerships in our production.

Currently, we are filing the product announcement to the state government for those EV products. And we can only go into the mass production after development product announcements and clarifications in place. As for the second question regarding the K23 and K27. At that moment, the regular models have not yet the DOT requirements for the safety in the standards.

We are still working on the improvement. And however, currently, we cannot really provide a very accurate estimate of when the requirements would be met. As you may know, such requirements for the safety standards in U.S. is much higher for the airbag safety and other standards much higher than those in China and European countries.

Currently, there is not any Chinese company have the EV meeting such safety standards in U.S. We are working very hard to achieve this goal, and thank you.

Operator

Thank you. Our next question comes from Ratna Bajwa with [Inaudible] Consulting. Please go ahead

Unknown speaker

Yes. Good day, Mr. Hu and everyone on the call. I was wondering since it has been brought up before.

Are you still contemplating a share buyback? And since I understand there was a board resolution to authorize this share price would be inducing such a buyback.

Kewa Luo -- Investor Relations

[Foreign language]

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Alan Lim -- Chief Financial Officer

Thank you for your question. Yes, we are considering such process and based on the market development and condition, we will execute the share buyback at the appropriate moment in condition.

Unknown speaker

So handing on to Frank Blatterman's question. By what time do you expect to have a production license for EVs?

Kewa Luo -- Investor Relations

[Foreign language]

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

[Foreign language]

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Alan Lim -- Chief Financial Officer

So as for your question, we expect that until March or April of next year 2022, we will kick off the mass production and sales of our EV models for the domestic market.

Operator

Thank you. Our next question comes from George Kyriakos, who's a private investor. Please go ahead.

Unknown speaker

Hi. Thanks for taking my question. You can correct me if I'm wrong, I see the focus and can be it's shifting to the sports equipment as an EV. Nevertheless, it's heavy competition coming from China and outside China for the EV sector.

My question is what appropriate focus always can be taken in advance to eliminate this competition or to be one of their competitors was with heavy competition coming in the market for the EV? Or is your focus is going toward the sports models? Thank you.

Kewa Luo -- Investor Relations

I'm sorry, can you repeat the first part?

Unknown speaker

Yes. Is your focus as the sports equipment for the EV since I see most of the revenue coming from the EV equipment as sports equipment, more than 40% or your focus is the car and what appropriate steps you take in to eliminate the competition or the heavy competition coming in the market?

Kewa Luo -- Investor Relations

OK. [Foreign language]

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Alan Lim -- Chief Financial Officer

Thank you for your question. It's a really great one for us. So first of all, as for the scooters, is I think as like a supplemental business. However, our focus is always on the EV and related products.

So in the EV market, we are trying to divide into two streams. One is in such a competitive market, we try to focus in the car-hailing platform, especially for the domestic market with our advanced battery swap technology you definitely be facilitating the market and meeting order demand from the car-hailing platform users. So we expect there will be mass production from our such models that facilitate the car-hailing platform with the better swap in next April or May -- I mean March or April in 2022. Apart from our focus on the car-hailing platform, we also try to enter the market for the electronic UTV and ATV.

As you may know, currently, primarily of those models for the UTV and ATV are using gasoline. Because of the upcoming requirement and standard for the emission limit, most of the models will ship to electronic modes. With our technologies, we try to enter this market and try to be one of the pioneer and advanced market supplier in a couple of years. So that's our plan and goal.

And thank you again for your question.

Operator

[Operator instructions] There being no questions at this time. This will conclude our question-and-answer session. I would like to turn the conference back over to Xiaoming Hu for any closing remarks.

Xiaoming Hu -- Chief Executive Officer

[Foreign language]

Kewa Luo -- Investor Relations

Thank you again for attending today's conference call. We are confident that we going closer to the multiple targets spreading over EV products that is a business, e-scooter, and market expansion. Look forward to sharing with you more positive news in our next call.

Operator

[Operator signoff]

Duration: 31 minutes

Call participants:

Kewa Luo -- Investor Relations

Xiaoming Hu -- Chief Executive Officer

Frank Blatterman -- Private Investor

Alan Lim -- Chief Financial Officer

Unknown speaker

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