2022 Net Revenue Increased 4.3% to $8.9
million
Expanded Product Lineup, Increased Average
Selling Price, Refined Go-to-Market Strategy, and Built Foundation
for Accelerated Growth via New Production Capacity
Cenntro Electric Group Limited (NASDAQ: CENN) (“Cenntro” or “the
Company”), a leading EV technology company with advanced, market-
validated electric commercial vehicles (“ECVs”), today announced
its financial results for the second half and full year ended
December 31, 2022.
Full Year Financial and Operating Highlights
- Net revenue of $8.9 million increased 4.3% year over year on
higher average selling prices and expanded go-to-market strategy
that includes a direct in-country sales model.
- Expanded product lineup with four new vehicles for Europe and
North America.
- Homologated two new vehicles and began shipping vehicles in
Europe.
- Received both EPA and California Air Resources Board’s (“CARB”)
Certificate of Conformation for LS400 for the U.S. market.
- Expanded vehicle direct in-country distribution and
go-to-market service infrastructure.
- Expanded vehicle assembly capacity in the U.S., Europe and
China.
“In 2022, our management team has worked tirelessly to carefully
navigate numerous challenges which affected our industry last year,
including global supply chain issues, closed ports in China due to
China’s “ZERO Covid-19 Policy”, Covid-related quarantines and
lock-downs, and extended timelines required to achieve
country-by-country homologations including U.S. Environmental
Protection Agency (“EPA”) certifications and state-level
certifications such as the California Air Resources Board’s
(“CARB”) certification for zero-emission vehicle in the state of
California. Despite these challenges, we made significant progress
towards our goal of becoming a leading designer and manufacturer of
electric commercial vehicles,” said Peter Wang, Chief Executive
Officer. “Throughout 2022, we significantly expanded our product
lineup with four new vehicles for the European and North American
markets with the introduction of the LS100, LS260, LS300 and LS400.
We also successfully homologated the LS260 and LS100 and began
shipping in Europe and received the EPA’s Certificate of Conformity
for our LS400 in December 2022. On June 23, our LS 400 received
certification from the California Air Resources Board (“CARB”) as a
zero-emission vehicle in the state of California. The certification
is awarded to vehicle manufacturers who meet specific emissions
standards in compliance with CARB’s regulations. Having received
credentials from CARB and the EPA, Cenntro can now sell its LS400
in every state throughout the United States.
“Further, we expanded our go-to-market strategy from a
distributor model to now include an in-country direct sales model.
We have launched eight EV centers across the U.S., Poland, Germany,
Italy, Spain, Morocco, and the Dominican Republic. Going forward,
we believe our in-country direct sales team will allow us to better
control both the sales process as well as the after-sales service
support to our dealers and customers. Our regional teams can
provide varied amounts of support to regional dealers in areas
including pricing, sales margins, inventory, customer experience,
and marketing strategy.
“These major investments and milestone achievements will set a
strong foundation to accelerate our growth and marks a major
turning point for Cenntro to capture our market potential. I am
confident that with our production, distribution, and service
support infrastructure capabilities, we are poised to rapidly
accelerate commercialization and momentum in the months ahead,”
concluded Wang.
Edmond Cheng, Chief Financial Officer added, “From a financial
perspective we navigated a challenging business, capital, and
credit market environment in 2022. Because the Company relies on
China for its supply chain, the Company continued to be impacted by
China’s zero-covid policies, which were in place until the end of
the year. Particularly, it impacted our ability to cost effectively
source key components from suppliers due to supply chain
disruptions and significantly higher freight costs. While a number
of our peers pursued their growth plan to achieve sufficient scale,
we made note of the noticeable drawbacks, including an acceleration
of their cash burn rate in a very challenging capital and credit
market. This type of overly ambitious production ramp-up would
appear to have placed too heavy a burden of working capital
requirements on the financial condition of our peers. Instead, our
approach focused on building fundamentals including generating our
global demand capabilities through investments in our eight
Electric Vehicle Centers and the completion of the acquisition of
Tropos Motors Europe GmbH to now become Cenntro Automotive Europe.
At the same time, we tightly controlled our costs. One of
management’s guiding principles at Cenntro is frugality, including
many of us taking on multiple roles and responsibilities.
“Sales volume of our electric commercial vehicles decreased
50.1% year-over-year to 458 compared to 918 in 2021. We achieved an
increase of 23.4% to 337 units for the first half of 2022 compared
to 273 units in the first half of 2021. However, due to challenges
including, but not limited to, the shutdown of ports in China
during the second half of 2022, change to our go-to-market model in
the United States which impacted sales of the Metro® in the United
States, and the extended time needed to fully homologate our LS400
in the U.S. Our sales volume in the second half of 2022 declined by
81.2% to 121 units from 645 units in the same period of 2021. This
decline in volume was more than compensated for by the increase in
average selling price (“ASP”) from approximately $7.9 thousand in
2021 to approximately $18.0 thousand in 2022, an increase of
126.5%. Our improvement in ASP was driven by our transition to an
in-country direct sales model and the launch of new models
including the LS200 and Teemak. As a result, full year revenue for
2022 increased by 4.3% to $8.9 million. At the end of 2022, we had
approximately $154M in cash and cash equivalents on our balance
sheet. We also had $31.8 million in inventory which consisted of
approximately $19.8 million in finished goods inventory ready to be
launched in 2023.
“We are also working diligently to finalize and file our Form
10-Q for the quarter ended March 31, 2023, and to re-establish
timely financial reporting as soon as possible.
“As we look into 2023, we are confident that some of these
challenges are behind us, and we look forward to providing an
update on our progress throughout 2023,” concluded Cheng.
Second Half 2022 Business Highlights
- Announced the launch of six Electric Vehicle Centers in support
of our global distribution system including an expansion in Spain,
Italy, Poland, Turkey, Morocco, and the Dominican Republic.
- Logistar 400 All-Electric commercial vehicle received EPA’s
Certificate of Conformity.
- Commenced shipment of LS260 and LS100 vans to European
markets.
- Completed construction of advanced lithium-ion battery facility
in Mexico.
- Herne, Germany factory began assembly of Metro and Teemak
product lines.
- Commenced shipments of LS200 vans and cargo trucks to the
European market.
Full Year 2022 Financial Results
Net Revenues
Net revenue was $8.9 million in 2022, an increase of 4.3% from
$8.6 million in 2021. The increase was primarily due to the launch
of the LS 200 in the European market and an improvement in ASP.
Gross Profit/(Loss)
Gross loss was $0.5 million in 2022, compared with gross profit
of $1.5 million in 2021. Gross margin was negative 5.7% in 2022,
compared with 17.5% in 2021. The decrease in our gross profit was
caused by (i) the additional inventory write-down of approximately
$0.9 million representing approximately 10.8% of revenues of
vehicle sales; (ii) a decrease in gross profit margin, excluding
inventory write-down, of our Metro model from a gross margin of
approximately 32.6% in 2021 to approximately 12.7% in 2022
reflecting additional costs in quality improvements and higher
shipping costs in 2022; (iii) the realized gross margin of our
newly introduced model Logistar 200 was approximately 21.0%.
Operating Expenses
Total operating expenses were $54.7 million in 2022, compared
with $18.0 million in 2021. The increase was primarily driven by
headcount growth, increased marketing events and travel expenses as
we expand globally as well as increased research and development
expenses to broaden our product portfolio.
Net Loss Attributable to the Company’s Shareholders
Net loss was $110.1 million in 2022, compared with net loss of
$16.4 million in 2021.
Adjusted EBITDA1
Adjusted EBITDA was negative $43.2 million in 2022, compared
with Adjusted EBITDA of negative $7.0 million in 2021.
Balance Sheet
Cash and cash equivalents were $154.0 million as of December 31,
2022, compared with $261.1 million as of December 31, 2021.
Second Half 2022 Financial Results
Net Revenue
Net revenue was $3.9 million in the second half of 2022,
compared with $6.1 million in the second half of 2021. The decrease
was due to the reduction in the sales volume of Metro EVs being
partially offset by the increase in the sales volume of the new
Logistar™ 200.
Gross Profit/(Loss)
Gross loss was $1.0 million in the second half of 2022, compared
with gross profit of $1.1 million in the second half of 2021. Gross
margin was negative 26.8% in the second half of 2022, compared with
17.2% in the second half of 2021. The change in gross margin was
primarily due to the increase of inventory write-down, a decrease
in our Metro model gross margin reflecting additional costs in
quality improvements, higher shipping costs, and a competitive
pricing strategy for our newly introduced Logistar 200.
Operating expenses
Total operating expenses were $30.0 million in the second half
of 2022, compared with $13.0 million in the second half of 2021.
The increase was primarily driven by headcount growth, increased
marketing and travel expenses as we expand globally as well as
increased research and development expenses to broaden our product
portfolio.
Net Loss Attributable to the Company’s Shareholders
Net loss was $87.7 million in the second half of 2022, compared
with net loss of $11.9 million in the second half of 2021.
Adjusted EBITDA1
Adjusted EBITDA was negative $30.2 million in the second half of
2022, compared with Adjusted EBITDA of negative $4.0 million in the
second half of 2021.
We define Adjusted EBITDA as net (loss)/income before net
interest expense, income tax expense and depreciation and
amortization as further adjusted to exclude the impact of
stock-based compensation expense and non-recurring expenses. We
caution investors that amounts presented in accordance with our
definition of Adjusted EBITDA may not be comparable to similar
measures disclosed by our industry peers because not all companies
and analysts calculate Adjusted EBITDA in the same manner. 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
Year Ended December
31,
2022
2021
(Unaudited)
Net loss
$
(112,145,263
)
$
(16,421,807
)
Interest expense, net
844,231
1,069,581
Income tax expense
—
—
Depreciation and amortization
953,872
632,256
Share-based compensation expense
4,031,629
1,128,325
Nasdaq listing related expenses
—
6,559,095
Expenses related to TME Acquisition
348,987
-
Expenses related to one-off payment
inherited from the original Naked Brand Group
8,299,178
-
Impairment of goodwill
11,111,886
-
Convertible bond issuance cost
5,589,336
-
Loss on redemption of convertible
promissory notes
7,435
-
Change in fair value of convertible
promissory notes and derivative liability
37,774,928
-
Adjusted EBITDA
$
(43,183,781
)
$
(7,032,550
)
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
CONSOLIDATED BALANCE
SHEETS
(Expressed in U.S. dollars,
except for the number of shares)
December 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
153,966,777
$
261,069,414
Restricted cash
130,024
595,548
Accounts receivable, net
565,398
2,047,560
Inventories
31,843,371
8,139,816
Prepayment and other current assets
16,138,330
7,989,607
Amounts due from related parties -
current
366,936
1,232,634
Total current assets
203,010,836
281,074,579
Non-current assets:
Equity method investments
5,325,741
329,197
Investment in equity securities
29,759,195
-
Property, plant and equipment, net
14,962,591
1,301,226
Intangible assets, net
4,563,792
3,313
Right-of-use assets
8,187,149
1,669,381
Amount due from related parties -
non-current
-
4,834,973
Other non-current assets, net
2,039,012
2,151,700
Total non-current assets
64,837,480
10,289,790
Total Assets
$
267,848,316
$
291,364,369
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities:
Accounts payable
$
3,383,021
$
3,678,823
Accrued expenses and other current
liabilities
5,048,641
4,183,263
Contractual liabilities
2,388,480
1,943,623
Operating lease liabilities, current
1,313,334
839,330
Convertible promissory notes
57,372,827
-
Deferred government grant, current
26,533
-
Amounts due to related parties
716,372
15,756,028
Total current liabilities
70,249,208
26,401,067
Non-current liabilities:
Other non-current liabilities
-
700,000
Deferred government grant, non-current
497,484
-
Derivative liability - investor
warrant
14,334,104
-
Derivative liability - placement agent
warrant
3,456,404
-
Operating lease liabilities,
non-current
7,421,582
489,997
Total non-current liabilities
25,709,574
1,189,997
Total Liabilities
$
95,958,782
$
27,591,064
Commitments and contingencies
EQUITY
Ordinary shares (No par value; 300,841,995
and 261,256,254 shares issued and outstanding as of December 31,
2022 and 2021, respectively)
-
-
Additional paid in capital
397,497,817
374,901,939
Accumulated deficit
(219,824,176
)
(109,735,935
)
Accumulated other comprehensive loss
(5,306,972
)
(1,392,699
)
Total equity attributable to
shareholders
172,366,669
263,773,305
Non-controlling interests
(477,135
)
-
Total Equity
$
171,889,534
$
263,773,305
Total Liabilities and Equity
$
267,848,316
$
291,364,369
CENNTRO ELECTRIC GROUP
LIMITED
CONSOLIDATED AND COMBINED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in U.S. dollars,
except for number of shares)
For the Years Ended December
31,
2022
2021
Consolidated
Combined
Net revenues
$
8,941,835
$
8,576,832
Cost of goods sold
(9,455,805
)
(7,073,391
)
Gross (loss) profit
(513,970
)
1,503,441
OPERATING EXPENSES:
Selling and marketing expenses
(6,525,255
)
(1,034,242
)
General and administrative expenses
(32,822,709
)
(14,972,682
)
Research and development expenses
(6,362,770
)
(1,478,256
)
Provision for doubtful accounts
(5,986,308
)
(469,702
)
Impairment loss of right-of-use assets
(371,695
)
-
Impairment loss of intangible assets
(2,995,440
)
-
Reverse of deferred tax liabilities
898,632
-
Impairment loss of property, plant and
equipment
(550,402
)
(6,215
)
Total operating expenses
(54,715,947
)
(17,961,097
)
Loss from operations
(55,229,917
)
(16,457,656
)
OTHER EXPENSE:
Interest expense, net
(844,231
)
(1,069,581
)
Loss on redemption of convertible
promissory notes
(7,435
)
-
(Loss) income from equity method
investments
(12,651
)
15,167
Change in fair value of convertible
promissory notes and derivative liability
(37,774,928
)
-
Change in fair value of equity
securities
(240,805
)
-
Convertible bond issuance cost
(5,589,336
)
-
Foreign currency exchange loss, net
(409,207
)
-
Impairment loss of goodwill
(11,111,886
)
-
Other (expense) income, net
(924,867
)
1,090,263
Loss before income taxes
(112,145,263
)
(16,421,807
)
Income tax expense
-
-
Net loss
(112,145,263
)
(16,421,807
)
Less: net loss attributable to
non-controlling interests
(2,057,022
)
-
Net loss attributable to the Company’s
shareholders
$
(110,088,241
)
$
(16,421,807
)
OTHER COMPREHENSIVE LOSS
Foreign currency translation
adjustment
(3,889,706
)
512,140
Total comprehensive loss
(116,034,969
)
(15,909,667
)
Less: total comprehensive loss
attributable to non-controlling interests
(2,032,455
)
-
Total comprehensive loss to the
Company’s shareholders
$
(114,002,514
)
$
(15,909,667
)
Weighted average number of shares
outstanding, basic and diluted *
263,323,238
175,090,266
Loss per share, basic and diluted *
(0.42
)
(0.09
)
CENNTRO ELECTRIC GROUP
LIMITED
CONSOLIDATED AND COMBINED
STATEMENTS OF CASH FLOW
(Expressed in U.S. dollars,
except for number of shares)
For the Year Ended December
31,
2022
2021
Consolidated
Combined
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss
$
(112,145,263
)
$
(16,421,807
)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization
953,872
632,256
Amortization of operating lease
right-of-use asset
1,616,853
636,921
Impairment of property, plant and
equipment
550,402
6,215
Impairment of intangible assets
2,995,440
-
Reversal of deferred tax liabilities
(898,632
)
-
Impairment of right-of-use assets
371,695
-
Impairment of goodwill
11,111,886
-
Written-down of inventories
2,155,400
1,265,890
Provision for doubtful accounts
5,986,308
469,702
Convertible promissory notes issuance
costs
5,589,336
-
Loss on redemption of convertible
promissory notes
7,435
-
Changes in fair value of convertible
promissory notes and derivative liabilities
37,774,928
-
Changes in fair value of equity
securities
240,805
-
Foreign currency exchange loss, net
409,207
14,212
Share-based compensation expense
4,031,629
1,128,325
Government grants of federal loan
forgiven
-
(53,619
)
Gain from disposal of plant and
equipment
(10,334
)
(55,087
)
Gain from disposal of long-term
investment
-
(508,156
)
Equity pickup of the equity investment
12,651
(15,167
)
Changes in operating assets and
liabilities:
Accounts receivable
233,570
(2,002,919
)
Inventories
(20,483,127
)
(5,087,563
)
Prepayment and other assets
(6,753,851
)
(2,687,994
)
Amounts due from/to related parties
(1,190,573
)
(128,640
)
Accounts payable
(2,144,725
)
(128,508
)
Accrued expense and other current
liabilities
1,358,858
1,376,950
Contractual liabilities
633,825
286,499
Long-term payable
(700,000
)
700,000
Operating lease liabilities
(1,108,721
)
(903,096
)
Net cash used in operating
activities
(69,401,126
)
(21,475,586
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equity investment
(4,256,276
)
(310,038
)
Proceeds from disposal of long-term
investment
-
465,941
Cash payment for long-term investment
payable
-
(909,808
)
Purchase of plant and equipment
(3,285,072
)
(756,269
)
Purchase of land use rights and
property
(16,456,355
)
-
Acquisition of 65% of CAE’s equity
interests
(3,612,717
)
-
Payment of expense for acquisition of
CAE’s equity interests
(348,987
)
-
Cash acquired from acquisition of CAE
1,118,700
-
Purchase of equity securities
(30,000,000
)
-
Proceeds from disposal of land use rights
and property
-
7,812,967
Proceeds from disposal of property, plant
and equipment
309
75,934
Loans provided to third parties
(1,323,671
)
-
Loans provided to related parties
-
(232,529
)
Repayment of loans from related
parties
1,280,672
1,088,441
Net cash (used in) provided by
investing activities
(56,883,397
)
7,234,639
CASH FLOWS FROM FINANCING
ACTIVITIES:
Loans proceeds from related parties
-
5,020,218
Repayment of loans to related parties
(1,726,614
)
(6,493,707
)
Repayment of loans to third parties
(1,113,692
)
(3,928,380
)
Proceeds from bank loans
-
53,619
Purchase of CAE’s loan
(13,228,101
)
-
Reduction of capital
(13,930,000
)
-
Cash proceed from reversed
recapitalization
-
247,382,859
Loan proceeds from Naked Brand Group
Limited
-
30,000,000
Proceed from issuance of convertible
promissory notes
54,069,000
-
Redemption of convertible promissory
notes
(3,727,500
)
-
Proceed from exercise of share-based
awards
14,386
-
Payment of expense for the reverse
recapitalization
(904,843
)
(883,300
)
Net cash provided by financing
activities
19,452,636
271,151,309
Effect of exchange rate changes on
cash
(736,274
)
205,566
Net (decrease)increase in cash, cash
equivalents and restricted cash
(107,568,161
)
257,115,928
Cash, cash equivalents and restricted cash
at beginning of year
261,664,962
4,549,034
Cash, cash equivalents and restricted cash
at end of year
$
154,096,801
$
261,664,962
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid
$
(369,410
)
$
(830,837
)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cashless exercise of warrants
$
18,549,864
$
-
Right of use asset financed by lease
liabilities
$
-
$
1,206,244
Exemption of debt due from
shareholders
$
-
$
426,781
Direct cost related to reverse
recapitalization payable
$
-
$
904,843
Reduction of capital investment recorded
as due to related parties
$
-
$
13,930,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230630142262/en/
Investor Relations Contact:
MZ North America CENN@mzgroup.us 949-491-8235
Company Contact:
PR@cenntroauto.com IR@cenntroauto.com
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