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01/11 03:43
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $5.8 million, a $1.2 million decrease compared to Q2 2025 and a decrease of $0.6 million year-on-year. The decrease was attributed to the completion of several older builds and macroeconomic pressures.
Gross Profit Negative $1.7 million, down $3.1 million from Q2 2025 and $3.7 million from Q3 2024. The negative gross margin was primarily due to the completion of older builds, resulting in a one-time release of $3 million in labor and consumable allocations, and a $0.5 million out-of-period adjustment for inventory.
Inventory Decreased from $7.9 million to $3.8 million quarter-over-quarter. This was due to one-time cleanup adjustments and the release of inventory tied to transactions completed earlier in the year.
Operating Expenses $3.4 million, a $0.6 million decrease from the prior quarter but an increase of $0.8 million year-over-year. The quarterly decrease reflects cost reductions, while the year-over-year increase was driven by higher G&A expenses, including $0.4 million in noncash stock-based compensation.
Loss from Operations $5.1 million, an increase of $2.5 million from the prior quarter and $4.5 million from the prior year period. This was primarily driven by the impacts on gross margin.
Net Income $2.2 million compared to a net loss of $4.3 million in the prior quarter and a net loss of $2.6 million in Q3 2024. The positive net income was due to noncash fair value gains from the conversion of debt to preferred stock.
Porsche 911 Restoration Program: ECD expanded into the Porsche market with bespoke Porsche 911 restoration and customization. The inaugural build, Project Gravette, won 'Best in Show' at the 2025 Festival of Speed. This program is expected to elevate average selling prices and drive factory efficiencies.
ECD and CTC Collaboration: ECD partnered with Chelsea Truck Company to create modern Land Rover Defender L663 and INEOS Grenadier builds. These vehicles are designed for faster delivery and broader market reach, with production cycles as short as 5 days.
Retail Expansion: ECD's retail strategy includes store-in-store concepts and standalone locations. The success of the Nantucket and West Palm Beach locations has encouraged further expansion, blending vintage and modern offerings to drive engagement and sales.
Dealership Partnerships: ECD is partnering with dealerships to offer upgrade packages on new vehicle purchases, extending its brand reach and integrating earlier into the purchase journey.
Cost Reduction Measures: Implemented targeted cost savings and refined inventory management practices, resulting in over $1 million in annualized savings. Additional cost-saving actions in Q4 are expected to bring another $1 million in savings in 2026.
Production Optimization: Focused on clearing older vehicle builds to improve gross margins and shifted production to new client builds with healthier economics.
Diversification of Offerings: Expanded into high-demand segments like Porsche 911 resto-mods and modern SUVs, leveraging craftsmanship to differentiate and broaden the addressable market.
Financial Strategy Adjustments: Took actions to strengthen liquidity, including the sale of Series C preferred stock, conversion of convertible notes to common stock, and leveraging an equity purchase facility agreement for up to $300 million.
Tariffs and Shipping Costs: The company is experiencing elevated costs from tariffs and shipping, which are pressuring the cost of goods sold (COGS) and impacting gross margins.
Legacy Builds Impact: The completion of older vehicle builds with less favorable economics has negatively affected gross margins and financial performance.
Inventory Adjustments: A $0.5 million out-of-period adjustment and a $3 million release of labor and consumable allocations from the balance sheet have created financial strain, though these are described as one-time impacts.
NASDAQ Compliance: The company is currently not in compliance with NASDAQ listing requirements due to bid price and shareholder equity deficits, which could impact its market presence and investor confidence.
Economic Pressures: Macroeconomic conditions, including logistics inflation, continue to create challenges for the company’s cost structure.
Financial Losses: The company reported a loss from operations of $5.1 million, driven by the aforementioned impacts on gross margin and elevated operating expenses.
Margin Normalization: Margins are expected to normalize following the completion of legacy builds and cost structure resets.
Cost Reduction Measures: Targeted cost savings and refined inventory management practices are expected to result in over $1 million in annualized savings, with the majority impacting financials throughout 2026.
Porsche 911 Expansion: The company has formally expanded into the Porsche 911 restoration and customization market, with additional commissions expected next calendar year. Porsche 911s are anticipated to become a meaningful long-term contributor to the boutique mix.
ECD and CTC Collaboration: The collaboration with Chelsea Truck Company introduces modern Land Rover Defender and INEOS Grenadier builds, expanding the total addressable market and leveraging existing factory capacity. Production cycles for these vehicles can be completed in as little as 5 days.
Retail Strategy: The company plans to expand standalone ECD locations and integrate ECD and CTC showrooms to blend vintage and modern offerings, driving engagement and sales.
Cost Savings in Q4: Additional cost-saving actions in Q4 are expected to bring an incremental $1 million in annual savings, realized in 2026.
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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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