Kandi Technologies Group, Inc. (KNDI) Earnings Call Transcript & Summary

Greetings, and welcome to Kandi Technologies Group, Inc. First Half 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kewa Luo, Investor Relations. Please go ahead.

Thank you. Hello, everyone, and welcome to Kandi Technologies Group, Inc.'s First Half 2026 Earnings Conference Call. As a reminder, today's call is being recorded. The company's financial and operational highlights were issued in a press release earlier today and are available online. You can access the earnings press release and subscribe to the company's e-mail alerts by visiting the Investor Relations section of our website at ir.kandigroup.com. Joining us today are Mr. Feng Chen, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Before we begin, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform 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 obligations to update any forward-looking statements, except as required under applicable laws. Unless otherwise noted, all financial figures discussed today are in U.S. dollars. I will now turn the call over to our CEO, Mr. Feng Chen, who will deliver his remarks in Chinese, followed immediately by English translation. Mr. Chen, please go ahead.

[Interpreted] Good day, investors and analysts. Welcome to Kandi Technologies Earnings Conference Call for the First Half of 2026. Thank you for your continued interest and support of the company. The first half of 2026 marked a new phase in Kandi's strategic transformation as our new business initiatives began to deliver tangible results. Our battery swapping business, in particular, is gaining commercial traction, showing that our earlier investment and development efforts are paying off. It is now poised to become an important growth driver, growth momentum as our core business also strengthened significantly, driving robust gains in both our top and bottom lines. Meanwhile, we continue to build out our off-road vehicle dealer network, refine our retail partnership model and refresh and upgrade our product lineup. This financial and operational progress demonstrates that our strategy is driving improvements in operating performance and business fundamentals, reinforcing our confidence in our next phase of growth. Our first half revenue grew 57.4% year-over-year to $57.1 million. Revenue from our core off-road electric vehicle business increased 59.4% to $54.2 million, including $6.1 million from Rawrr, the electric off-road motorcycle brand we acquired in February 2026. Higher revenue and gross profit, combined with relatively stable operating expenses drove a return to operating profitability and a significant improvement in earnings. Net income rose 452.2% year-over-year to $9.4 million. As of June 30, our cash and cash equivalents, restricted cash and certificates of deposits totaled $285.7 million, providing a solid financial foundation to support future growth. On our full year 2025 earnings call, I outlined Kandi's store engine strategy, strengthening our core North American off-road electric vehicle businesses while cultivating new growth drivers in energy and intelligent equipment. On the new driver side, we are advancing our battery swapping equipment and intelligent robotics business, and we broadened our energy solutions for AI data centers by acquiring a controlling stake in Xinchu New Energy. Going forward, we will continue to improve product competitiveness and sales channel efficiency in our core business while tailoring our commercialization efforts for new business to each one stage of development. Over time, this will diversify our revenue base and growth drivers. Next, I would like to share more details on our first half progress and recent developments across each business as well as our priorities going forward. Let me begin with our new business initiatives. We have made tangible progress in commercializing our battery swapping equipment and are now in volume production. In July, our subsidiary, China Battery Exchange secured its first batch order from CATL Tianjin Energy subsidiary for heavy-duty truck battery swapping station equipment. Just 2 months later, it received another batch order. These orders demonstrate that our investments in technology and strategic partnerships are beginning to pay off, while also providing visibility for planning, production and deliveries, we expect this business to begin generating meaningful revenue in the second half of this year, emerging as a new growth driver for Kandi. Our entry into the battery swapping equipment business marks an important step in extending Kandi's technology and manufacturing expertise to new energy infrastructure. Looking ahead, our priorities are to fulfill customer orders, improve product quality and delivery efficiency and strengthen our after-sales service capabilities. We aim to deepen the customer relationships and secure follow-on orders by constantly meeting our project commitments. As we accumulate project delivery experience and scale manufacturing capacity, we will be better positioned to drive sustained growth in this business. In intelligent robotics, we continue to invest in autonomous quadruped robots, focusing on security patrols, inspections and applications in logistics parks. This business remains in an early R&D stage. Our work is currently centered on aligning development with customer needs, tailoring products to specific use cases and validating their performance in real-world settings. Progress in these areas will guide our decisions on further investment. Additionally, Xinchu New Energy in which we acquired a controlling stake in the third quarter of this year is expanding its AI data center backup power and energy storage business. In July, Xinchu became an authorized solutions reseller of Schneider Electric. By combining Schneider Electric's established UPS and data center infrastructure products with Xinchu's expertise in energy storage batteries and battery management systems, we can offer data center customers integrated orders overseas. We expect the business to make meaningful revenue contribution this year as AI computing infrastructure continues to expand globally, we will build out our integrated solutions to meet demand for highly reliable backup power and energy storage, cultivate customer relationships and drive order conversion, further developing this new revenue stream. Turning to our core business, that is the North American off-road electric vehicle market with a portfolio spanning UTVs, golf carts and other electric off-road products. In the first half, average monthly sales through our U.S. dealer network doubled year-over-year, reflecting strong sales momentum. This growth was driven by greater contributions from existing dealers and the addition of new partners. Looking ahead, we will deepen collaboration with existing dealers, add high-quality new partners and align these efforts with upcoming product launches to broaden our reach and improve sales performance. On the product side, we continue to clear inventory of slow selling models and old models in the first half. We expect to complete the transition to an all-new Kandi product lineup in the fourth quarter. We are closely coordinating inventory optimization, new product launches and sales channel upgrades to provide our dealers and retail partners with a more competitive product mix and help drive core business growth in 2027. Rawrr is already contributing to our revenue, and we continue to deepen its post-acquisition integration with the group. Amid intense price competition in the electric off-road motorcycle market, we are preserving Rawrr's premier brand positioning, focusing on product performance, rider experience and brand equity to differentiate the business and support sustainable growth. We are integrating Kandi Group's R&D, manufacturing and supply chain capabilities with Rawrr's brand assets and distribution network to develop products and respond to U.S. market demand more efficiently. We are also broadening Rawrr's product offering and strengthening channel coordination to drive sales growth across its existing network of more than 300 dealer partners. In the first half, Rawrr continued to expand its team and refine its operating system while building brand equity through professional recent events, trade shows and social media campaigns. Rawrr is also advancing development of an all-new product lineup with launches planned for 2027. This year, we are concentrating on managing the inventory transition, preparing for new launches and optimizing our sales channels. As the benefits of integration materialize, we are confident we can convert these product and channel strengths into revenue increases and make Rawrr a stronger growth driver for our North American business. In short, we have 4 priorities for the second half of this year. First, scale battery swapping equipment deliveries and support Xinchu New Energy in winning additional overseas orders. Second, sustain sales momentum in our North American off-road electric vehicle business while refining our sales channels and refreshing the Kandi product lineup. Third, strengthen Rawrr's team, supply chain and distribution network in preparation for its new product launches in 2027. Fourth, continue developing intelligent robotic solutions tailored to real-world applications. We remain confident about our outlook for 2027. We expect a significant upgrade to Kandi's product portfolio, new on product launches and revenue contributions from our emerging businesses to drive stronger growth. At the same time, we will maintain a disciplined approach to capital allocation, evaluating investments in new businesses, acquisitions and capacity expansion based on commercial progress, expected payback period and associated risks and returns and aligning the pace of investment with business needs to optimize capital efficiency. The management team and I are fully committed to strategic execution, converting the momentum in our core business and opportunities across our new business into sustainable growth and long-term value for our shareholders. Now let me turn the call over to our CFO, Alan Lim, who will provide details on our first half 2026 financial performance. Thank you.

Thank you, Mr. Chen, and Kewa. I'm Alan Lim, CFO of Kandi Technologies, and thanks, everyone, for joining us today. I will go over the financial results for the first half of 2026. Regarding the income statement, the net revenues were $57.1 million for the current period, up from 57.4% from $36.3 million for the same period in 2025, mainly due to an increase of sales of off-road vehicles compared to the prior year-end period as well as the additional revenue contributed by our new acquired entity, Rawrr, a subsidiary in the company acquired in February 2026. The cost of goods sold was $32.3 million in the current period, up 62.3% from $90.9 million for the same period of 2025. The increase was primarily due to the corresponding increase in sales. The gross profit was $28.8 million in the current period compared with $16.4 million for the same period of 2025. The gross margin was 43%. It was comparable to 45.2% for the same period of 2025. The total operating expenses were $19.3 million, up 5.3% from $18.3 million for the same period of 2025. There's a breakdown of different expenses. The R&D expenses were $2.4 million, a decrease of 3.5% from $2.5 million for the same period of 2025. Regarding the selling expenses, the total amount was $5.8 million, up 10% from $4.5 million for the same period of 2025. The increase reflected the higher sales activities. The G&A expenses were $11.9 million, up 5.4% from $11.3 million for the same period of 2025. The income from operations was $5.5 million in the current period compared with the loss from operations of $1.9 million for the same period of 2025. The net income increased 452.3% to $9.4 million from $1.7 million for the same period of 2025. The increase was primarily driven by the higher net revenues and gross profit, while the operating expenses remained relatively stable and controllable. The basic and diluted net income attributed to the company's shareholders per share were $0.10 compared with $0.02 for the same period of 2025. Turning to our balance sheet. Our financial position remains strong. As of June 30, 2026, the company had cash and cash equivalents, restricted cash and certificates of deposits totaling $285.7 million compared with $211.9 million as of December 31, 2025. The working capital was $189.5 million as of June 30, 2026. So that concludes my remarks. I will now hand the call back to Kewa for any final comments. Thank you, everyone.

Thank you once again for joining us today. If you have any further questions, please reach out using the contact information provided on our website. We appreciate your time and interest in Kandi Technologies. This concludes today's conference call. You may now disconnect.

Ladies and gentlemen, thank you for your participation. You may now disconnect your lines or log off the webcast, and enjoy the rest of your day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]