Q2 2023 Net Revenue Increased 32% to $4.2
million
Number of Vehicles Sold Increased Sequentially
by 82% to 235 Vehicles
Gross Profit Margin Increased 2,180 bps to
27.1%
Average Selling Price Increased 11% to
Approximately $18.6 Thousand
Cenntro Electric Group Limited (NASDAQ: CENN) (“Cenntro” or “the
Company”), a leading electric vehicle technology company with
advanced, market-validated electric commercial vehicles (“ECVs”),
today announced its financial results for the second quarter ended
June 30, 2023.
Second Quarter 2023 Financial and Operating
Highlights
- Net revenue of $4.2 million increased 32% year over year.
- Sales volume increased by 26% year over year and 82%
sequentially quarter over quarter to 235 vehicles.
- Average selling price (“ASP”) increased 11% year over year to
approximately $18,600.
- Adjusted EBITDA for the quarter is a loss of $12.5 million
compared to a loss of $12.2 million for Q2 2022.
- Entered collaboration agreement with EAVX, a JB Poindexter
& Co Inc. Business Unit, to develop innovative and
industry-leading All-Electric last mile and vocational work truck
solutions.
- Achieved certification by the California Air Resources Board
for the LS400 and the Metro®, allowing the vehicle to be considered
for monetary incentives including the California Hybrid and
Zero-Emission Truck and Bus Voucher Incentive Project
(“HVIP”).
- Cenntro was recognized as a Clean Vehicle Manufacturer by the
U.S. Internal Revenue Service which will allow Cenntro vehicles to
be eligible for vehicle tax credits of up to $40,000 under Internal
Revenue Code (IRC) 45W.
- Announced a new assembly plant in Ontario, California,
scheduled to be operational in the third quarter of 2023, to
position the company for future sales on West Coast, the leading
market for EV adoption.
- Opened sales in the Central American and Caribbean markets with
the Logistar® 100 and Logistar® 260.
“Our sales momentum in the second quarter continued to ramp up
as distribution expanded from the first quarter of 2023. We also
qualified as a Commercial Clean Vehicle Manufacturer with the U.S.
Internal Revenue Service and the LS400 and Metro received
certification from the California Air Resources Board. Both actions
open our vehicles to significant incentive programs in the U.S.
market,” said Peter Wang, Chairman and Chief Executive Officer,”
Taken together, these incentive programs will make the acquisition
costs of our vehicles more competitive and cost effective for
businesses looking to electrify their fleets. Vehicles permitted
into the HVIP program are eligible for monetary vouchers to reduce
the total cost for the purchaser. This certification takes on
greater significance with CARB’s recent Advanced Clean Truck
regulation, which will require that all local delivery and
governments fleets must be zero emissions by 2036.
“Building on our first quarter results with the expansion of our
vehicle lineup, the expansion of our assembly capabilities in the
United States, and our qualification for government incentives in
both the United States and the European Union, we are optimistic
that our sales growth momentum will continue even amidst the
current uncertain economic and supply chain environment.
“We continue to expand our product line to meet the diverse
demand for our ECVs. During the quarter we announced a strategic
partnership with EAVX, a unit of JB Poindexter & Co Inc., which
will focus on the integration of their commercial truck bodies with
Cenntro’s All-Electric LS300 and LS400 cab chassis.
“Our recent announcement of a new facility in California will be
our third assembly facility in the U.S., joining the assembly
plants in Jacksonville, Florida, and Howell, New Jersey. With the
certification of both the LS400 and the Metro by the California Air
Resources Board, we are now ready to expand our sales in the State
of California, one of the largest markets in the U.S.
“Looking ahead, we continue to position Cenntro to capture
market share with a diverse and innovative lineup of all-electric
vehicles, and an expanded geographic footprint for production,
distribution, and service infrastructure. Combined with our hybrid
EV Center and distribution partner sales model, we are beginning to
gain traction with customers,” concluded Wang.
Edmond Cheng, Chief Financial Officer added, “Sales volume in
the second quarter of 2023 of our electric commercial vehicles
increased 26% year-over-year to 235 from 186 in the same period of
2022. At the same time, we achieved an increase of net revenue of
32% to approximately $4.2 million for the second quarter of 2023
compared to $3.2 million in the same period of 2022. The increase
in net revenue is mainly attributable to an approximately $1.3
million increase in vehicle revenue.
“The average selling price was approximately $18.6 thousand in
the second quarter of 2023, up 11% from approximately $16.9
thousand in the second quarter of 2022. We continue to benefit from
the transition to an in-country direct sales model and the launch
of new models including the LS100, LS200, LS260 and Teemak. Also,
gross margin for the three months ended June 30, 2023 and 2022 was
approximately 27.1% and 5.3%, respectively. The increase in our
gross profit was the result of (i) a reduction in inventory
write-down of $0.6 million in the second quarter of 2022 compared
to no inventory write down in the second quarter of 2023 and (ii)
the realized gross margin of the newly introduced LS260 for the
three months ended June 30, 2023 which we have just begun to
introduce the LS260 in Europe. We are very pleased our newly
introduced models, especially the LS260, are making inroads into
the European market.
“As of June 30, 2023, we had approximately $60.4 million in cash
and cash equivalents on our balance sheet. We also had $2.6 million
in accounts receivable, $41.8 million in inventory which consisted
of approximately $29.8 million in finished goods inventory, and
approximately $30.5 million in investments in equity securities as
of June 30, 2023,” concluded Cheng.
Second Quarter 2023 Financial Results
Net Revenues
Net revenue was $4.2 million for the three months ending June
30, 2023, an increase of 32% from $3.2 million in the second
quarter of 2022. The increase was primarily due to an increase in
vehicle sales and an improvement in the average selling price.
Gross Profit
Gross profit was $1.1 million in the second quarter of 2023,
compared with gross profit of approximately $0.2 million in the
second quarter of 2022. Gross margin was 27% in the second quarter
of 2023, compared with 5% in the second quarter of 2022. The
increase of our overall gross profit was driven by less impairment
of inventory recognized in the three months ended June 30, 2023
compared with the same period in 2022. Our gross margin of vehicle
sales for the three months ended June 30, 2023 and 2022 was 26.4%
and 2.7%, respectively. The increase in our gross profit for
vehicle sales was mainly attributed to i) the realized gross margin
for the Metro was approximately 17.8% for the three months ended
June 30, 2023 compared to -12.8% in the same period of 2022,
including an inventory write-down of approximately $0.6 million for
the period, and ii) the realized gross margin of the newly
introduced Logistar®260 for the three months ended June 30,
2023.
Operating Expenses
Total operating expenses were approximately $14.2 million in the
second quarter of 2023, compared with $14.9 million in the second
quarter of 2022. While we continue to invest resources in our
Marketing & Sales and Research and Development, we maintain
tight control over General & Administrative Expenses. The
increases in the Marketing & Sales and Research &
Development expenses were offset by the reduction in the General
& Administrative expenses.
Net Loss Attributable to the Company’s Shareholders
Net loss was approximately $14.1 million in the second quarter
of 2023, compared with net loss of $13.1 million in the second
quarter of 2022.
Balance Sheet
Cash and cash equivalents were approximately $60.4 million as of
June 30, 2023, compared with $154.0 million as of December 31,
2022.
Adjusted EBITDA1
Adjusted EBITDA was approximately $(12.5) million in the second
quarter of 2023, compared with Adjusted EBITDA of $(12.2) million
in the second quarter of 2022.
We define Adjusted EBITDA as net income (or net loss) before net
interest expense, income tax expense, depreciation and amortization
as further adjusted to exclude the impact of stock-based
compensation expense and other non-recurring expenses including
expenses related to TME Acquisition, expenses related to one-off
payment inherited from the original Naked Brand Group, impairment
of goodwill, convertible bond issuance fee, loss on redemption of
convertible promissory notes, loss on exercise of warrants, and
change in fair value of convertible promissory notes and derivative
liability. We present Adjusted EBITDA because we consider it to be
an important supplemental measure of our performance and believe it
is frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry.
Management believes that investors’ understanding of our
performance is enhanced by including this non-GAAP financial
measure as a reasonable basis for comparing our ongoing results of
operations.
US-GAAP NET INCOME (LOSS) TO
ADJUSTED EBITDA RECONCILIATION
Three Months ended June
30,
Six Months ended June
30,
2023
2022
2023
2022
(Expressed in U.S. Dollars)
(Unaudited)
(Unaudited)
Net loss
$
(14,077,166
)
$
(13,705,920
)
$
(25,191,143
)
$
(23,054,289
)
Interest expense, net
(1,262
)
(222,672
)
53,153
(286,873
)
Income tax expense
25,468
(48,861
)
25,468
(48,861
)
Depreciation and amortization
455,779
344,507
786,411
484,937
Share-based compensation expense
1,256,484
1,110,440
2,410,291
1,309,856
Loss on redemption of convertible
promissory notes
(1,900
)
101
-
Loss on exercise of warrants
14,745
227,615
Change in fair value of convertible
promissory notes and derivative liability
(199,697
)
(73,425
)
-
Expenses related to TME Acquisition
348,987
348,987
Expenses related to one-off payment
inherited from the original Naked Brand Group
8,299,178
Adjusted EBITDA
(12,527,549
)
(12,173,520
)
$
(21,761,529
)
$
(12,947,065
)
1 Represents a non-GAAP financial measure.
About Cenntro Electric Group Ltd.
Cenntro Electric Group Ltd. (or "Cenntro") (NASDAQ: CENN) is a
leading designer and manufacturer of electric commercial vehicles.
Cenntro's purpose-built ECVs are designed to serve a variety of
organizations in support of city services, last-mile delivery, and
other commercial applications. Cenntro plans to lead the
transformation in the automotive industry through scalable,
decentralized production, and smart driving solutions empowered by
the Cenntro iChassis. For more information, please visit Cenntro's
website at: www.cenntroauto.com.
Forward-Looking Statements
This communication contains "forward-looking statements" within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that are not historical facts.
Such statements may be, but need not be, identified by words such
as "may,'' "believe,'' "anticipate,'' "could,'' "should,''
"intend,'' "plan,'' "will,'' "aim(s),'' "can,'' "would,''
"expect(s),'' "estimate(s),'' "project(s),'' "forecast(s)'',
"positioned,'' "approximately,'' "potential,'' "goal,''
"strategy,'' "outlook'' and similar expressions. Examples of
forward-looking statements include, among other things, statements
regarding assembly and distribution capabilities, decentralized
production, and fully digitalized autonomous driving solutions. All
such forward-looking statements are based on management's current
beliefs, expectations, and assumptions, and are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from the results expressed or implied in this
communication. For additional risks and uncertainties that could
impact Cenntro's forward-looking statements, please see disclosures
contained in Cenntro's public filings with the Securities and
Exchange Commission (the “SEC”), including the "Risk Factors" in
Cenntro's Annual Report on Form 10-K filed with the SEC on June 30,
2023 and which may be viewed at www.sec.gov.
CENNTRO ELECTRIC GROUP
LIMITED
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
June 30,
2023
December 31,
2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
60,390,172
$
153,966,777
Restricted cash
92,461
130,024
Accounts receivable, net
2,646,333
565,398
Inventories
41,798,511
31,843,371
Prepayment and other current assets
18,339,914
16,138,330
Deferred cost- current
10,273
-
Amounts due from a related party
212,320
366,936
Total current assets
123,489,984
203,010,836
Non-current assets:
Long-term investment, net
4,959,769
5,325,741
Investment in equity securities
30,472,663
29,759,195
Property, plant and equipment, net
18,508,847
14,962,591
Intangible assets, net
6,439,333
4,563,792
Right-of-use assets
19,734,961
8,187,149
Deferred cost - non-current
207,974
-
Other non-current assets, net
2,232,206
2,039,012
Total non-current assets
82,555,753
64,837,480
Total Assets
$
206,045,737
$
267,848,316
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities:
Accounts payable
$
3,364,228
$
3,383,021
Accrued expenses and other current
liabilities
3,543,840
5,048,641
Contractual liabilities
3,314,661
2,388,480
Operating lease liabilities, current
4,303,890
1,313,334
Convertible promissory notes
11,904,153
57,372,827
Deferred government grant, current
53,046
26,533
Amounts due to related parties
41,302
716,372
Total current liabilities
26,525,120
70,249,208
Non-current liabilities:
Deferred government grant, non-current
968,079
497,484
Derivative liability - investor
warrant
12,205,830
14,334,104
Derivative liability - placement agent
warrant
3,456,137
3,456,404
Operating lease liabilities,
non-current
16,001,387
7,421,582
Total non-current liabilities
32,631,433
25,709,574
Total Liabilities
$
59,156,553
$
95,958,782
Commitments and contingencies
EQUITY
Ordinary shares (No par value; 304,449,091
and 300,841,995 shares issued and outstanding as of June 30, 2023
and December 31, 2022, respectively)
-
-
Additional paid in capital
399,517,411
397,497,817
Accumulated deficit
(244,856,609
)
(219,824,176
)
Accumulated other comprehensive loss
(7,770,097
)
(5,306,972
)
Total equity attributable to
shareholders
146,890,705
172,366,669
Non-controlling interests
(1,521
)
(477,135
)
Total Equity
$
146,889,184
$
171,889,534
Total Liabilities and Equity
$
206,045,737
$
267,848,316
CENNTRO ELECTRIC GROUP
LIMITED
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2023
2022
2023
2022
Net revenues
$
4,237,520
$
3,204,689
$
7,708,064
$
5,035,322
Cost of goods sold
(3,090,275
)
(3,036,237
)
(6,366,075
)
(4,503,840
)
Gross profit
1,147,245
168,452
1,341,989
531,482
OPERATING EXPENSES:
Selling and marketing expenses
(2,742,749
)
(1,531,460
)
(4,611,734
)
(2,626,568
)
General and administrative expenses
(9,285,213
)
(12,014,453
)
(16,643,477
)
(20,226,284
)
Research and development expenses
(2,143,070
)
(1,389,153
)
(3,712,989
)
(1,814,512
)
Total operating expenses
(14,171,032
)
(14,935,066
)
(24,968,200
)
(24,667,364
)
Loss from operations
(13,023,787
)
(14,766,614
)
(23,626,211
)
(24,135,882
)
OTHER EXPENSE:
Interest income (expense), net
1,262
222,672
(53,153
)
286,873
(Loss) income from long-term
investment
(148,645
)
4,941
(129,603
)
10,878
Impairment of long-term investment
(8,538
)
-
(1,154,666
)
-
Gain (loss) on redemption of convertible
promissory notes
1,900
-
(101
)
-
Loss on exercise of warrants
(14,745
)
-
(227,615
)
-
Change in fair value of convertible
promissory notes and derivative liability
199,698
-
73,425
-
Change in fair value of equity
securities
60,452
-
713,468
-
Other (expense) income, net
(1,119,295
)
784,220
(761,219
)
734,981
Loss before income taxes
(14,051,698
)
(13,754,781
)
(25,165,675
)
(23,103,150
)
Income tax (expense) benefit
(25,468
)
48,861
(25,468
)
48,861
Net loss
(14,077,166
)
(13,705,920
)
(25,191,143
)
(23,054,289
)
Less: net loss attributable to
non-controlling interests
(2,682
)
(633,922
)
(158,710
)
(670,641
)
Net loss attributable to the Company’s
shareholders
$
(14,074,484
)
$
(13,071,998
)
$
(25,032,433
)
$
(22,383,648
)
OTHER COMPREHENSIVE LOSS
Foreign currency translation
adjustment
(2,824,971
)
(4,078,240
)
(2,487,693
)
(3,825,086
)
Total comprehensive loss
(16,902,137
)
(17,784,160
)
(27,678,836
)
(26,879,375
)
Less: total comprehensive loss
attributable to non-controlling interests
(2,683
)
(483,216
)
(183,278
)
(540,805
)
Total comprehensive loss to the
Company’s shareholders
$
(16,899,454
)
$
(17,300,944
)
(27,495,558
)
(26,338,570
)
CENNTRO ELECTRIC GROUP
LIMITED
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
June
30,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash used in operating
activities
$
(35,499,138
)
$
(29,071,262
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equity investment
(680,932
)
-
Purchase of plant and equipment
(5,082,473
)
(145,857
)
Purchase of land use right and
property
(2,200,559
)
(9,260,497
)
Acquisition of CAE’s equity interests
(1,924,557
)
(3,612,717
)
Cash acquired from acquisition of CAE
-
1,118,700
Payment of expense for Acquisition of
CAE’s equity interests
-
(348,987
)
Proceeds from disposal of property, plant
and equipment
-
320
Loans provided to third parties
(100,000
)
(5,149,884
)
Repayment of loans from related
parties
-
286,920
Net cash used in investing
activities
(9,988,521
)
(17,112,002
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of loans to related parties
-
(1,741,868
)
Repayment of loans to third parties
-
(1,155,829
)
Purchase of CAE’s loan
-
(13,228,101
)
Reduction of capital
-
(13,930,000
)
Redemption of convertible promissory
notes
(45,583,321
)
-
Payment of expense for the reverse
recapitalization
-
(904,843
)
Net cash used in financing
activities
(45,583,321
)
(30,960,641
)
Effect of exchange rate changes on
cash
(2,543,188
)
(981,467
)
Net decrease in cash, cash equivalents and
restricted cash
(93,614,168
)
(78,125,372
)
Cash, cash equivalents and restricted cash
at beginning of period
154,096,801
261,664,962
Cash, cash equivalents and restricted cash
at end of period
$
60,482,633
$
183,539,590
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid
$
1,051,054
$
374,745
Income tax paid
$
4,903
$
-
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Right of use assets obtained in exchange
for operating lease obligations
$
-
$
7,613,564
Cashless exercise of warrants
$
2,168,185
$
-
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230814873892/en/
Investor Relations Contact: MZ North America
CENN@mzgroup.us 949-491-8235
Company Contact: PR@cenntroauto.com
IR@cenntroauto.com
Cenntro (NASDAQ:CENN)
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