Cenntro Electric Group Announces Third Quarter 2023 Unaudited Financial Results

Cenntro Electric Group Limited (NASDAQ: CENN) (“Cenntro”, “we”, “our”, “us”, or the “Company”), a leading electric vehicle technology company with advanced, market-validated electric commercial vehicles (“ECVs”), today announced its financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Financial and Operating Highlights

• Net revenue of $5.8 million increased 175% year over year;

• Sales volume increased by 326% year over year and 27% sequentially quarter over quarter to 298 vehicles;

• Average selling price (“ASP”) increased 15.7% year over year to approximately $19,200; and

• Adjusted EBITDA for the quarter is a loss of $12.1 million compared to a loss of $12.0 million for Q3 2022.

Peter Z. Wang, Chief Executive Officer explained, “Our sales momentum in the third quarter continued to ramp up as distribution expanded from the second quarter of 2023. Consequentially, we have sold 298 vehicles in Q3 2023 compared to 235 vehicles in Q2 2023 and 70 in Q3 2022. More importantly, to date the demand for some of our newly launched vehicle models in Europe such as the LS260® has outpaced our estimates. We have also experienced positive sales momentum for our iChassis, having sold 103 units in Q3, though these 103 units are not inclusive of the number of vehicles sold because iChassis is not considered a complete vehicle. We continue to build our sales momentum in 2023 from quarter to quarter to improve the effectiveness of our sales process, including having streamlined our North American sales team structure during Q3 2023.

“We built on our second quarter results by expanding our vehicle lineup to include Avantier and Antric, as well as our assembly capabilities in the United States, benefitting from our qualification for government incentives in both the United States and the European Union. Based on these developments, we are optimistic that our sales growth momentum will continue even amidst the current uncertain economic and global political environment.

“Cenntro’s most recent US assembly and manufacturing facility in Ontario, California is preparing to scale production in Q4 2023. The facility has the capability to assemble and distribute the TeeMak, Metro and Logistar series models with a focus on the Logistar 400® and future models. We believe Ontario will also support strategic growth and sales on the west coast and the entire western region of the United States. California remains a strong market for EV sales and infrastructure development, as such we believe dealer and distributor partnerships will strengthen sales and aftermarket support. In addition, from a supply chain standpoint, we believe California will serve as a very cost-effective point of entry for our products from China to serve our customers on the West Coast.

“Cenntro’s LS400 was also approved for the Commercial Clean Vehicle Credit, allowing purchasers to apply for a Federal Tax Credit under IRC 45W. Further, in conjunction with the June 2023 California Air Resources Board (“CARB”) certification for the Metro and LS400, these models have recently been approved for Zero-Emission Powertrain Certification (“ZEP”), which moves us forward in the process for Hybrid and Zero-Emission Truck and Bus Voucher Inventive Program (“HVIP”) approval. The HVIP program allows end purchasers to apply for the HVIP vouchers offsetting their purchase price. Under the standard HVIP approval, customers may qualify for up to $60,000 of the purchase of the LS400. The final HVIP approval is anticipated in Q4 2023.

“Our footprint in the European market continues to build in scale with our EVC customer base looking for competitive products to complete their local commerce needs and allowing them to participate in Zero Emission initiatives. We have also determined that providing a compatible charging solution to our customers that is available for sale along with our product line is vital. We have begun to develop relationships that will allow us to provide a charging solution as part of the sales transaction.

“Looking ahead, we continue to position Cenntro to capture market share with our 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 continue to gain traction with customers,” concluded Wang.

Edmond Cheng, Chief Financial Officer added, “Sales volume in the third quarter of 2023 of our electric commercial vehicles increased 326% year-over-year to 298 from 70 in the same period of 2022. At the same time, we achieved an increase of net revenue of 175% to approximately $5.8 million for the third quarter of 2023 compared to $2.1 million in the same period of 2022. The increase in net revenue is mainly attributable to an approximately $3.6 million increase in vehicle revenue. More importantly, we continue to experience quarter-to-quarter revenue growth in 2023 as third quarter grew 36% from the second quarter of 2023 to $5.8 million and second quarter 2023 revenue grew 22% from the first quarter of 2023. We are cautiously optimistic that the growth momentum will continue in the fourth quarter, reflecting our investment in expanding our product offerings and strengthening our global distribution capabilities.

“Our average sales price was approximately $19.2 thousand in the third quarter of 2023, up 15.7% from approximately $16.6 thousand in the third quarter of 2022. We continue to benefit from the transition to an in-country direct sales model and our launch of new models, particularly the LS260 as mentioned by Peter. Also, our overall vehicles gross margin for the nine months ended September 30, 2023 and 2022 was approximately 16.3% and -3.6%, respectively. The increase in our overall gross profit was the result of less impairment of inventory recognized in the nine months ended September 30, 2023 compared with the same period in 2022.

“As of September 30, 2023, we had approximately $44.6 million in cash and cash equivalents on our balance sheet. We also had $4.6 million in accounts receivable, $43.1 million in inventory which consisted of approximately $28.4 million in finished goods inventory, and approximately $28.6 million in investments in equity securities as of September 30, 2023,” concluded Cheng.

Third Quarter 2023 Financial Results

Net Revenue

Net revenue was $5.8 million for the three months ended September 30, 2023, an increase of 175% from $2.1 million in the same period of 2022. The increase was primarily due to an increase in vehicle sales, spare parts sales, including 103 units of the iChassis, and an improvement in the average selling price.

Gross Profit

Gross Profit for the three months ended September 30, 2023 was approximately $0.7 million, an increase of approximately $1.4 million from approximately $0.6 million of gross loss for the three months ended September 30, 2022. For the three months ended September 30, 2023 and 2022, our overall gross margin was approximately 12.4% and -30.3%, respectively. Our gross margin of vehicle sales for the three months ended September 30, 2023 and 2022 was 15.8% and -34.8%, respectively. The increase of our overall gross profit was caused by less impairment of inventory recognized in the three months ended September 30, 2023 compared with the same period in 2022.

Operating Expenses

Total operating expenses were approximately $13.3 million in the third quarter of 2023, compared with $9.6 million in the third quarter of 2022.

Selling and marketing expenses for the three months ended September 30, 2023 were approximately $2.6 million, an increase of approximately $1.0 million or approximately 60.8% from approximately $1.6 million for the three months ended September 30, 2022. The increase in selling and marketing expenses in 2023 was primarily attributed to the increase in salary expenses and marketing related professional fee of approximately $0.2 million and $0.8 million, respectively.

General and administrative expenses for the three months ended September 30, 2023 were approximately $9.1 million, an increase of approximately $2.9 million or approximately 45.8% from approximately $6.2 million for the three months ended September 30, 2022. The increase in general and administrative expenses in 2023 was primarily attributed to an increase in salary and social insurance and legal, share-based compensation and ROU amortization $1.2 million, $0.8 million and $0.7 million, respectively.

Research and development expenses for the three months ended September 30, 2023 were approximately $1.6 million, a decrease of approximately $0.2 million or approximately 9.0% from approximately $1.8 million for the three months ended September 30, 2022. The decrease in research and development expenses in 2023 was primarily attributed to the decrease in design and development expenditures of approximately $0.5 million, offset by the increase in salary expense of approximately $0.2 million.

Net Loss

Net loss was approximately $16.1 million in the third quarter of 2023, compared with net loss of $15.1 million in the third quarter of 2022.

Balance Sheet

Cash and cash equivalents were approximately $44.6 million as of September 30, 2023, compared with $154.0 million as of December 31, 2022.

Adjusted EBITDA

Adjusted EBITDA was approximately $(12.1) million in the third quarter of 2023, compared with Adjusted EBITDA of $(12.0) million in the third 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. Our 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

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231114757150/en/