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01/11 03:47
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite strategic initiatives like Mustang expansion and cost optimization, the company faces significant risks, including NASDAQ delisting, declining margins, increased losses, and heavy reliance on volatile Bitcoin strategy. Financial metrics show increased losses and reduced cash flow, outweighing any positive outlook from strategic plans, leading to a negative sentiment.
Revenue $7 million, a $0.5 million increase over Q2 '24, driven by higher revenue build.
Gross Profit $1.4 million, down $0.7 million from Q2 '24. Gross margin was 20% compared to 32% in the prior year quarter. The decline was primarily due to higher shipping and custom fees.
Operating Expenses $4 million, a $1.4 million increase year-over-year, primarily driven by higher G&A expenses.
G&A Expenses $3.7 million, up $1.4 million from Q2 '24, largely due to higher noncash equity compensation expense.
Loss from Operations $2.6 million, an increase of $2.1 million from the prior year period.
Net Loss $4.3 million compared with $2.0 million in Q2 '24. This increased loss was primarily driven by the increased operating loss and higher interest expense, partially offset by a gain on the fair value adjustments to warrant and conversion option liabilities and a $0.4 million gain from debt converted into preferred stock.
Loss Per Share $0.11 compared to $0.06 in the prior year quarter.
Cash and Cash Equivalents $0.6 million as of June 30, '25, compared with $1.5 million as of December 31, '24.
Cash Used in Operating Activities $4.2 million for the first 6 months of 2025, including $1.2 million to fund working capital.
Financing Activities Provided $3.4 million, primarily from the proceeds of the January and June 2025 convertible notes and the April 2025 note payable.
Introduction of Mustang Program: ECD launched its first custom Mustang, Project Ghost, a 1967 fastback with a Roush-engineered 465-horsepower small block V8. This program expands ECD's offerings into American muscle cars, diversifying revenue streams and leveraging existing facilities without additional CapEx.
Awards and Recognition: Project Ghost Mustang won Best of Class at the Route 66 Road Fest, and the Jaguar E-type Project won first place at the Larz Anderson Auto Museum's British Car Day, strengthening ECD's brand reputation.
Retail Expansion: ECD opened immersive retail locations in West Palm Beach and Nantucket, which have driven backlog growth, generated revenue, and accelerated inventory conversion into cash. These locations target wealthy and influential markets in the U.S.
Global Classic Car Market: ECD operates in a $94 billion global classic car ecosystem, leveraging its pricing power and brand reputation to command premium price points.
Manufacturing Efficiencies: Implemented a 'right first-time' strategy to minimize errors, reduce shipping timelines, and accelerate revenue recognition.
Cost Structure Optimization: Initiated cost-saving measures, refined inventory management, and negotiated a 12-month grace period on debt service obligations to create a leaner operating model.
Bitcoin Strategy: Secured a $500 million equity facility for Bitcoin accumulation and growth initiatives. Launched a promotion offering $21,000 credit for customers paying with Bitcoin, targeting crypto-native demographics.
Financial Restructuring: Converted $12 million of convertible debt into preferred stock, raised $1.7 million in equity capital, and filed an S-1 registration for a $500 million equity line of credit to strengthen the balance sheet and regain NASDAQ compliance.
Higher costs associated with tariffs, shipping, and customs: The company faced increased costs due to tariffs, shipping, and customs, which negatively impacted gross margins, reducing them from 32% to 20% compared to the prior year.
Decline in gross profit and increased operating expenses: Gross profit decreased by $0.7 million year-over-year, while operating expenses increased by $1.4 million, driven by higher general and administrative expenses, including non-cash equity compensation.
Net loss and cash flow challenges: The company reported a net loss of $4.3 million, up from $2.0 million in the prior year, and cash and cash equivalents dropped to $0.6 million as of June 30, 2025, raising concerns about liquidity.
Supply chain challenges for Mustang rollout: The Mustang program faced supply chain issues, particularly with part quality and fit, requiring real-time adjustments to production processes, which could delay scalability and efficiency.
NASDAQ delisting notice: The company received a delisting notice from NASDAQ due to noncompliance with listing requirements, posing a risk to investor confidence and market presence.
Dependence on equity financing and Bitcoin strategy: The company is heavily reliant on a $500 million equity facility, partially tied to a Bitcoin reserve strategy, which introduces volatility and potential financial risk given the unpredictable nature of cryptocurrency markets.
Mustang Program Expansion: The Mustang program is expected to expand, with multiple commissions already underway. The company anticipates streamlining production for the Mustang model by unit #2 or #3, leveraging existing expertise to improve efficiency and scalability.
Retail Strategy: ECD plans to expand its retail strategy, including opening new retail units and further leveraging immersive community-centered retail locations. These efforts are expected to drive backlog growth, generate revenue, and accelerate inventory conversion into cash.
Cost Structure Optimization: The company has implemented targeted cost savings, refined inventory management practices, and negotiated a 12-month grace period on debt service obligations. These measures aim to create a leaner operating model, preserve cash, and support disciplined growth.
Bitcoin Financing and Strategy: ECD secured a $500 million equity facility to fund growth initiatives, including the strategic accumulation of Bitcoin as a primary reserve asset. This strategy is expected to engage the crypto-native customer demographic and serve as a marketing catalyst.
Compliance and Financial Position: The company is focused on regaining and maintaining NASDAQ compliance, strengthening its balance sheet, and achieving positive cash flow. Steps include filing an S-1 registration statement, converting debt into preferred stock, and raising additional equity capital.
The selected topic was not discussed during the call.
The earnings call reveals several concerning aspects: declining revenue and gross profit, elevated costs due to tariffs and shipping, and non-compliance with NASDAQ requirements. Despite some positive initiatives like cost-saving measures and expansion into new markets, these are overshadowed by financial losses, poor gross margins, and economic pressures. The lack of clarity in the Q&A section further dampens sentiment. Given these factors, a negative stock price movement is likely over the next two weeks.
Despite strategic initiatives like Mustang expansion and cost optimization, the company faces significant risks, including NASDAQ delisting, declining margins, increased losses, and heavy reliance on volatile Bitcoin strategy. Financial metrics show increased losses and reduced cash flow, outweighing any positive outlook from strategic plans, leading to a negative sentiment.
The earnings report reflects financial challenges with a significant net loss and cash flow concerns. Despite revenue growth, gross profit fell sharply due to a write-down, and expenses rose significantly. The Q&A highlighted potential growth but lacked clarity on future strategies. No share repurchase program was announced, and the absence of a positive catalyst like a new partnership or optimistic guidance further supports a negative outlook. The company's operational struggles and liquidity issues are likely to lead to a negative stock price reaction in the near term.
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