Cenntro Electric Group Announces Second Quarter 2023 Unaudited Financial Results

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.

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.

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