CENN - Earnings call transcript Q4 2021 | Cenntro Electric Group Limited

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Operator

Good day ladies and gentlemen, and thank you for standing by. And welcome to the Cenntro Electric Group Earnings Conference Call for the Year Ended December 31, 2021. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and answer-session and instructions will follow at that time.

As a reminder, we are recording today’s call.

objections, disconnect any this have you you at may time. If

over will McInerney, McInerney, turn I to please the Ms. Now, Officer. call Marianne Marketing Cenntro’s proceed. Chief

Marianne McInerney

earnings Welcome you, XX, December Cenntro Thank hello, for everyone. and Electric year operator, XXXX. Group’s conference ended call the to

as Wang, few Executive That XXXX our well have Financial earlier newswire Edmond today. IR Chief release also Officer; webpage financial our at replay Cheng, available this released Peter We services. joining today. IR us We and is Cenntro’s press the Officer of as A on Cenntro’s on Company’s be Chief https://ir.cenntroauto.com our available hours website. call from call will in a on results

the Private the the meaning provision of Before Litigation Securities Harbor of discussion continue, we note within that Safe U.S. please Act today’s of Reform XXXX. statements contains forward-looking

goal, that intend, facts. by be, include not should, could, as statements driving position, decentralized other Examples among statements Forward-looking expressions. forward-looking words would, can, estimate, assembly of project, digitalized not similar such are statements may and include strategy, be, statements fully identified autonomous distribution and expect, may outlook capabilities, statements plan, aim, all will, anticipate, but production regarding and believe, and historical solutions. Such things forecast, may, potential,

inherent is please uncertainties unless stated, filings during are obligation as from dollars. under expectations and expressed the forward-looking in except mentioned SEC. the with other Forward-looking factors required that the to assume information actual materially does differ otherwise these Also, that in update law. U.S. The the risks any risks and figures involve and uncertainties, conference Company’s any Company’s Company today. not statements all to could applicable statement cause results note the included regarding public Further

GAAP in performance U.S. as in purposes. define before the to planning net considered the EBITDA loss determined interest and impact expense, with to and Principles, GAAP. measurement any compensation is used to that depreciation, U.S. presented as derived adjusted Accounting we gains. ongoing be with for Generally In expense, adjusted measure should an evaluate U.S. Adjusted internal and performance our EBITDA adjusted accordance net and exclude income accordance results forecasting net supplemental with EBITDA U.S. Accepted income Adjusted a accordance other EBITDA not our our performance or GAAP. We operations or in net income addition and to stock-based a or not or under required amortization, is measure as extraordinary or expense of in of tax non-recurring financial losses, further by not is charges alternative expenses, and for

website refer EBITDA please posted For before IR U.S. reconciliation that our of to shortly to the GAAP adjusted Company’s loss, our earnings we on call. this release net

considered Australian non-IFRS we company, standards XXXX, reporting requires to of public and Finally, is statements Securities the to auditing subject of information international financial Australian Corporations Corporations Australian limited not for financial audited discussing prepared was we financial information the are which prepared Act purposes accordance regulations that standards. The as under the and are with rules and the Australian today in Authorities. an Act financial and of be

go shortly we in ahead, our IFRS now With mind, our please our posted a before Wang, turn analysis that please me For reconciliation call. GAAP over U.S. our let financial CEO, to the that Mr. earnings this to Peter. of call to release refer the financial Peter website to results, Company’s

Peter Wang

Marianne, all you, Thank and our conference earnings joining everyone. Thank call for hello, you today.

Capital new purchase significant traded Market making Naked day Cenntro’s a milestone that Company company through a on and the the Cenntro cash concurrently the stock of a production history became in transaction, and expansion the Brand successfully Naked’s At hand. support future opened $XXX has on publicly than On remainder XXXX, divested million with can last clothing transaction Nasdaq of of a chapter accelerate the Group, That the us. business business more historic closing for growth.

to and With in the become industry urban the and and vehicle is Class lead models commercial leader Asia. vehicle of use have in in transformation for the providing each America, from commercial mission mind, urban Europe mission Class electric developed our for vehicles Our mainly target markets automotive in X, X sector, to electrical we delivery a services. in that

to continuously We for the representing performance is of XXXX. from are units, volume previous We XXX vehicle XX.X% for the material year. we shipping to This resulting and operational announce improved supply capability commercial disruption pleased testament growth a global crisis electrical of of despite achieved cost had that sales our growing producing the a chain increases. and vehicles, and number the selling

share. very challenges As the the ramping expand market overcome demand vehicles for our of our up remains to chain is to our strong, priority production the supply crisis,

long-term made to has one XX this fleet in TME, wholly XX in of operators. Last and and Europe and largest month, completed dealers distribution target major to our of subsidiary interest channel Europe, front SE, Germany of countries, the in acquisition XX equity across a owned partners. on Mosolf growth. of The TME strategic XX% also We sales importers network progress Motors a have support meaningful a a Tropos we directly

Jacksonville, new facility of will assembling facility square-foot some the the for Florida, expand believe address the with Europe with growing Herne, market. XXX,XXX European acquisition manufacturing vehicles per once year, to effort in in our are our will based operational. the fully local our region. This facility. European of We expected TME’s targeted combined be acquisition will assembly We need capable our is we which up in capabilities vehicles to Germany, that XX,XXX distribution the markets U.S. produce December, In for selected expect

export also for the and two also customer plants, of further In addition, packaging logistics, partners vehicle and support the needs three model also provides Currently, to network. plants we of capability assembly in expansion our and and and acquisition production we are party to finished planning materials, space Chongqing, for our launching third Besides the vehicles existing vehicles we support battery vehicle site outsource of OEMs. additional expanding operations. additional to new for for the the we production plan have through a The efficiency production additional and production our China. assembly,

and transaction we needed we As a scale stock production Naked hope of costs. from production, reduce our our working put Group, Having further more up scale we material increasing economies intend purchasing the to Brand secured will with capital strengthen interest acquisition Europe, distribution effort to develop has our increased marketing network sales our of our TME vehicle in The and in service Germany. quickly providers XX% to equity especially capabilities capabilities. of in distributors a

and to and add the features regional meet models of the customer new develop ongoing continue that vehicle sectors, XXXX the COVID improve the the backdrop associated conflict. supply to continuously We needs. to global industry Russia-Ukraine to will and lockdowns, our all a and chain economy, given demand vehicle shortages, vehicle be challenging for ever-growing respond pandemic year quality evolving

increase. both, including the cost of logistics the steel to expect critical of to We and continue components, batteries materials cost and of our

commercial our While near-term are fluid, strong. remains industrial focus vehicle on leading electrification condition

challenging we a building to And currently brand environment. the address We to believe navigate global have we needs. adequate cash are growing

pioneer commercial will in industry [Technical for to our we vehicles, become capture we automotive a a solid believe transformation. the strive and vast maintain Looking we as to growth Difficulty] ahead, frontrunner electric the demand

Now, CFO, performance. details let who call on Cheng, me Edmond will our over financial the turn to our XXXX provide Edmond?

Edmond Cheng

the Thank joining for our ended year Thank our will XXXX. key over XX, financial now results you, you, go everyone, Peter. for I call today. December

press earnings For to the of our full financial details our please release. results, refer

are increased very have supply, service manage costs. We performance shipping record despite and delivered to vehicle improvement, revenue our The ability demonstrated increased and higher other raw an led and gross delighted margin by to sales material income.

marketing Additionally, continue revenue boost in further up and and sales support growth, step of efforts to production. we

stock next development. the our of we our position, agreement fill of purchase a which phase business sheet additional closing us the Group, balance strength with solidified Brand to cash with Naked strong with gives Importantly,

supply from increase XXXX driven Within XX.X% revenue sales growth that part Geographically, and of XX% and million XXX.X% million, to sales. from income Moving able were vehicles chain another our from disruption, increase to vehicle $X.X higher of Europe $X.X revenue due from the profit results, XX% in improve of year able United XX.X% XX, our remainder others. States, service cost to to revenue gross number in channel up XXXX, for to generate over the XXXX, were the and XX% of gross Despite XX% on our We net $X.X we from primarily of XXXX, ended XXXX, $X.X our income. service by remainder in previous other our representing was spare resulting of December the from logistics year. sales million, partners. Asia costs profit. and and from an our to vehicles our with rose generated for Compared we an million sold the goods in in accounted sold other to with

largely by due in addition, Selling operating gross in IPO, vehicle increased expenses costs, on Group X.X% to and to the an increases to of Naked to expenses expenses administrative $X.X sales also And relating million. increased transaction is Meanwhile, higher XXX increase U.S. were in XX.X% up million. and revenue. due In expenses Brand in to driven XX and service rose and increase basis margin operations. an connection expansion million in Cenntro’s our $X $XX primarily to an marketing to points and expenses XX.X% XX% million. expenses administrative expenses was XX.X%, in with increase its year-over-year and combination proposed with and its general up and The General marketing increase XXXX. freight selling to total R&D

in with million result, $XX.X loss was non-recurring negative with the the $X.X Brand expenses to the foundation manufacturing Adjusted product a compared with after purchase with negative completion we proposed Naked of million net strong XXXX, the of related capacity able IPO, laying expansion back and enhance our balance $X net Group, to combination million portfolio. our adding Naked loss of $X.X EBITDA Group Upon As was XXXX. Brand million a and were the compared in for stock transaction sheet in XXXX.

As were the end of million equivalents cash $XXX.X XXXX, earlier. $X.X with and of year cash restricted cash, a compared December million our

call his for Peter remarks. Wang the back turn CEO, me our let to closing Now,

Peter Wang

Thanks, Edmond.

well of positioning run, an robust this profit creating technologies to shareholder. Looking our strong with level broader for us and address roadmap ahead, higher while driving market our revenue we financial and perspective in a position believe value and a advanced coupled long product

strong and We in product three We a new adding made new made global progress on gains. companies, challenges shipping the continents, sectors. us strategic all with almost capacities like are growth have positioned pervasive four a we, that, backdrop EV in we introduced have which We and acquisition of and the the supply all the lines. other global for concerned To of against industry challenges. market and chain share are

we believe we we of challenges, incorporate While strong supply into concludes localization to and That can continue exercise remarks. navigate our our prepared chain. continue a these to caution degree

Let’s ahead. now open Operator, please for go call the questions.

Operator

of you. from Thank Our Chan question [Operator comes Stifel. the Bruce Instructions] first of line

open. is line Your

Bruce Chan

good operator, Peter, and going Marianne. to my Thank I you, allotment if afternoon three out question you, may. to and max here, Edmond I’m

the look that to about the stated is, you China you mentioned? far, think once that on like, so month guess that per that I influenced the fully XXX-vehicle number to month and that that’s issues in us changes whether shutdowns, how to continue news. one, how the great by First and production which was Ukraine number, December curious then Jacksonville comes going what you supply XXXX specifically, situation, And what is could we’re chain volume I’m COVID line? to release production maybe I help Can and your extrapolate highest see

Peter Wang

have adding the you, Bruce. but continue we supply In year, to XXXX, so last our Okay. shipping And to will we vehicles, we’re adding and line, course, month produced we issue encountered last Yes. of and this issues. Thank product capacity. the due as we’ll the continue chain new XXX and year the dissuade, others, also our

supply the very is recently issue, going also, the battery the we’re made our chain pace. this happened, lockdown, in comes, But, and is supply China. as most of So, main we also current and the because internal chip it the to confident especially supply we very and are our shipping chain maintain and as

that’s a So, little hurting us bit.

we’re to that. thing, things. three in battery counter months’ And so, -- also order as also, and is maintain pack we going to this facility Jacksonville shortened going inventory to our in have operational, for we are batteries we United ordered to so And are States. to going co-produce our And our

thing. So, that’s the

going we’re we how cautious deal So, -- with that. extremely still to we’re

we moment, developing. them, is cannot know. But still whole We ourselves. going the prepared the don’t really give number have we’re this to We’re at and situation how because

Bruce Chan

question was Okay. my That’s battery going actually about second to helpful. really the be supply And issues. that

So, hear. that’s encouraging to

to jumping for in press noticed your you, had one towards of a change is you third question year, talking maybe this So, probably a then, the auditor. I and the the about release end Edmond. that

are Just want concerns there auditor implications any change. to from see, read to whether that or

Edmond Cheng

Yes, the end Group, transaction prior stock the transaction, the previously Cenntro Bruce. financial the of Group financial SEC Naked the was purchase the the auditor in Cenntro XXXX. due of historical Marcum with of And to nature the became Company. the statements Group for our statements of Brand to

the to IFRS with the Securities our is we Commission. Audit appointed an as the Company Australian company. purposes. is file the limited required Marcum approval, with Committee’s public financial Investments for audit Separately, So, auditor statements Australian also and SEC It

the with with I law, under file the Bruce. the of Australian your have and to appointed answered conduct purposes if authorities. audit I the required reports we compliance an question, Australia IFRS, For wonder Wis Australian

Bruce Chan

You did queue that. appreciate That’s very additional for questions. into back answers those any I’ll and helpful. jump I

Operator

you. Thank

D.A. Company. next & Michael Davidson Shlisky comes Our question from of

open. is line Your

Michael Shlisky

Hello. okay? me Good afternoon. you hear Can

Peter Wang

Yes.

Michael Shlisky

any it’s to, just that of like been couple of speak sales as got versus I’ve global on kind your people large Are who if Great. challenges? to, as you pipeline. us to orders? so couple give environment? with of business you’ve a you with given of orders lot current about and today of supply call. Give you one-off Are how sense having even not the smaller given seeing months, the first for Can are Maybe been to quick issues off ones a Thank companies, selling sense talking you us that we me quick. talking who you are selling current seeing? a all a going chain unwilling kind with start EV here. Maybe the

Peter Wang

Hi, Michael. Okay.

overall, commercial and also the especially product States, and is So, and strong first Europe remains all, with Japan, order is space for very very, of we the And there not very going is demand. our vehicle United issue Europe and getting strong electrical the aftermarket market to in support. the how the demand in and supply

very, very that’s important. So,

So, spare sales this supply. much spent network, network to our and after time year, and also develop the we so local parts distributor

good. is that So, very

now after also the orders exactly indication market on support. take the our we are and and when that as can right deliver deliver. know usually give targeted the require don’t big for small -- So, And confirm those But can targeting fleet. instead the we customer, market take of time business we we customer, confirm don’t if we and we are nationwide Because mid-tier market fleets only don’t big knowing order and any time. we also we purchase the

this not product indication. to of And So currently, have is any is And we backlog, the the to are interest time. issue. so-called in the not our key do can order deliver your the is question, backlog make orders. of quality, with we with lot we issue. can how moment, an with sure announcing answer a not we We time deliver Issue’s support. aftermarket on the to The really and the -- demand

Michael Shlisky

relative to far experience is produced the those XXXX? here far sense what us and XXXX question. some been maybe as it in us promised far has delivered my the as it. but vehicles vehicles to you filing, they performance? any as sense as other to to how the be as leads actually And Got Can delivered, were so And this how going warranty range, can you give give to expectations that in performed as on

Peter Wang

we So, make of what is have commercial you a urban and purposely also do? And operational vehicle we vehicle, daily require our they which the is we that Mostly, vehicle, long don’t hours services. targeted day. XX build a for to the nature do So provided because but range we for sufficient have delivery urban use. -- sure them range,

because You it their don’t stop want to it business. hurt will

warranty. aftermarket support But also Europe. warranty counterparts we in two longer warranty. we and have Europe, the requires our to minimum years our actually the there, capabilities the much and of regulation than our competitors in that sure make So, or And provide

a one for kilometers, comes the with battery, powertrain, XXX,XXX or controller example, five-year years a kilometers, For with warranty or also we also warranty five years provide eight which provide our motor so and XXX,XXX and and first. we our

and very provide warranty our other are in that than our so confident quality is we’ll competitors. or we longer so, better And

Operator

of question Birkenfeld next Karl Our from Instructions] [Operator American Investment. Trust comes

question, Your please?

Karl Birkenfeld

Peter much the on the Wang question you The on overall lockdowns will and How call is Okay. the recent very have Cheng. XXXX? of they Thank in gross margins there, Shanghai. Great I presentation. Edmond affect

Peter Wang

Yes.

Okay.

where see could So hard we will is the is But, is -- ultimately factories. big their on it the a China, it lockdown, go. of have to see -- very hard this to in impact especially this not continuation

many shortage, parts for it shipping, developing. the I do do next months. placed the is chain still and significant have little touched be major three components as of can supply aspects know order the we a of how we There the about since we and besides -- situation is You, not might

the other should we be three the next situation three components. that because is months, months, deteriorating, the So if already okay for in key words, warehousing we’re

in -- going battery and markets. a in local So, develop supply means facility. to our pack going future, are near in to our home That we we’re we to are our facility, chain also Jacksonville, to source going continue in

situation we this at cautious see bit, But, are implement supply supply we our to going the how going we global situation, revenue be continues going the also gross to to we if obvious, do I have see Asia. at U.S., be they’re then crucial plan supply moment, on shipping little anybody we as deteriorated, should that’s or We are we for going planned. our hurt we because be to very the now. to the like able And us, go. just to a impact But is we margin avoid. to because I supply we will right think and think, is deteriorating very going to how and the Europe, cannot to us? to Now, else, impact this

we’re don’t how effects, realization, the problem impacts. -- to So, wise, will the may sales big shipping to were there continues see it only I be But the vehicle the if deteriorate. production -- on is realize because the production going be, it not shipping re situation

And so, the will moment how see I guidance we will in project this the monitor think the -- we be cannot -- and and situation. really how

Karl Birkenfeld

Okay. Well, months the answer That correct? you. localized. And guess, as supply stock, thank great for was I as making you’re preparing three far chain a

Peter Wang

Yes.

Karl Birkenfeld

great. a That’s my for That’s Thank you questions. good solution. sir answering

Operator

Thank you.

Stifel. Our comes Bruce of next from question Chan

open. is line Your

Bruce Chan

appreciate to here. on right. All earlier dip I’m this but I if that the I not ask missed double capital And about allocation. call, I sure wanted

up of So, purchase acquisition majority major you wrapped Tropos. or a just

have you balance are fully the mentioned still at thinking about sheet. powder is I assume Jacksonville asset-light million funded point. How You capital dry $XXX on and that this you about in priorities here? for

M&A table be you? distribution? new on are more going for model you the battery development Is So, or to focused still on development,

Peter Wang

Edmond, could that? you answer

Edmond Cheng

secure priority Yes. are are enough is supplies. focusing what near focusing two is is, we’re Peter we One in that are future, Bruce, on we has to looking the mentioned there on. priorities what at

especially inventory, and components needed parts in investing key for is key So, us.

enough securing priority first the for inventory. our is So, very for piece working important capital. That’s money to our allocate

that CapEx Jacksonville development. to of product of into although development funded piece sense, it Another new need but still is we also from is sense in look and R&D terms from that continuation a of

continue are our to So, to well technology new we key stream. on those that for two secure focuses have leadership future as developments revenue as our the -- product

Bruce Chan

terrific. then, just Okay, And question a final here.

case that split as forward? XX% remain U.S. Europe, Do the you mentioned geographic going the You roughly XX% to expect

Edmond Cheng

to you that? answer want me Peter,

Peter Wang

or… Yes,

Edmond Cheng

ahead, Okay. Marianne. Go

Marianne McInerney

for believe do biggest market in Europe We products our be that to continue the XXXX. will

to response While the future to in the that the other in are our period, products due markets. excited developing not received evolving a guidance situation, we and by have U.S. the we position new are offer for

at to guidance do So, as Again, chain we very and time. evolving that it’s move geopolitical due the this provide COVID period the specific issues. remain and the uncertainties anticipate we least Europe difficult for supply XX% situations forward and this will to with at

Bruce Chan

Well, much appreciate received. all I well your so Understood, you for it. Okay. time. thank

Operator

Thank you.

If This you please have any concludes questions, contact us via other email. the call.

disconnect. may You now

Peter Wang

you. Thank

Cenntro Electric Group Limited (CENN) 25 Apr 222021 Q4 Earnings call transcript