ECD Autodesign reports record $7 million revenue in Q2 2025, but sees net loss deepen to $4.3 million due to rising costs and strategic shifts.

OPERATOR - (00:03:10)

Greetings and welcome to the ECD Autodesign second quarter 2025 earnings conference call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Donovan. Investor Relations. Thank you. You may begin.

Chris Donovan - Investor Relations - (00:03:39)

Thank you, Operator and good morning everyone. Welcome to ECD Autodesign Second Quarter 2025 Earnings Conference Call. Today's date is August 21, 2025 and on the call today from ECD Auto Design are Scott Wallace, Co Founder, Chief Executive Officer and Chairman, and Victoria Hay, Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may contain forward looking statements as they are defined under the Private Securities Litigation Reform act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in forward looking statements. For a discussion of such risks and uncertainties, please see ECD Auto Design's most recent filings with the SEC. All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statements to reflect the events that occur after this call. Also, during the course of today's call, the Company will be discussing one or more non GAAP financial measures. Reconciliation of these non GAAP financial measures to the most directly comparable GAAP measures are included in the press release we issued yesterday morning. Copies of the press release are available on ECD's investor website, ECDautodesign.com in addition, ECD Autodesign Form 10-K and 10-Qs are also available on the investor relations website. Now I'd like to turn the call over to Co Founder and Chief Executive Officer Scott Wallace. Scott.

Scott Wallace - Co Founder, Chief Executive Officer and Chairman - (00:05:12)

Good morning and thank you for joining US as we review ECD's second quarter results. I'm pleased to welcome our new Chief Financial Officer Vicky Hay to her first earnings call with ECD. While she recently assumed the role, Vicky and her team have already been key members of our finance team over the past several months. I'd also like to recognise Ben Pigott who will continue with ECD in a new role as Director of Corporate Development. In this position, Ben will focUS on strategic initiatives including M and A, investor engagement and the company's evolving capital markets and bitcoin treasury strategy. On behalf of the team, I want to thank him for his many contributions as CFO. ECD Automotive Design is a US based builder of Fully bespoke restored luxury vehicles combining classic automotive beauty with modern performance and cUStomisation. From our 100,000 square foot Rover Dome headquarters in Kissimmee, Florida, our master certified craftsmen hand build each vehicle. We also operate a logistics centre in the UK that sources vintage vehicles and parts for transformation. Our five core offerings now include Land Rover Defenders, Range Rover Classics, Jaguar E Types, Ford MUStangs and Toyota FJs. Each vehicle is designed in partnership with a client through an immersive luxury design process that results in a one of one personalised vehicle. To date we have completed 675 builds for cUStomers who have come to expect only the finest results. With average selling prices between 3,300,000 US $400,000 and the recent contracts reaching as high as US $620,000, ECD delivers gross margins among the best in the luxury automotive sector. We participate in a 94 billion global classic car ecosystem and operate a capital light model with scalable manufacturing and multiple growth channels including retail and licensing. Supported by strong brand reputation, ECD has the pricing power to consistently achieve high margins. Much like Ferrari, our bUSiness model enables US to command premium price points with cUStomization and craftsmanship serving as the core drivers of value. Our second quarter performance demonstrated this advantage, delivering record revenue of US $7 million on the strength of bespoke demand and manufacturing efficiencies, including a right first time strategy designed to minimise errors, maximise efficiency, enabling more complex builds with shorter shipping timelines and accelerating the revenue recognition. However, we did have to navigate the current macro environment including higher costs associated with tariffs, shipping and cUStoms. A highlight of the second quarter for the delivery of ECD's first cUStom MUStang, a natural extension of our leadership in Land Rover and Jaguar restorations into the iconic world of American mUScle cars. Project ghost, the first MUStang built entirely in hoUSe by ECD was a 1967 fastback that embodies everything. ECD stands for one of one personalisation, authentic heritage powertrains and best in class craftsmanship. Powered by A RoUSh engineered 465 horsepower small block V8 and built in a modern RS-spec chassis, Ghost delivers the balance of raw mUScle and refined drivability that few in the market can replicate. Our exclUSive partnership with RoUSh allows US to preserve the MUStang's original identity while enhancing reliability, performance and daily USability. The MUStang program demonstrates the scalability of our model, expanding our addressable market, diversifying revenue streams and delivering high margins, all while leveraging our existing factory and cUStomer journey without incremental capex. With multiple commissions already underway. Inspired by America's most iconic MUStangs, the program has quickly begun generating excitement beyond our cUStomer base. That momentum was reinforced in July when Project Ghost MUStang won the Best of Class at the Route 66 road fest in Tulsa and our Jaguar E Type project, the Wealth Loop Commission, earned first place at the Lars Anderson Auto MUSeum's British Cartier. These national awards validate both the craftsmanship at the heart of ECD and a successful expansion into American mUScle, further strengthening our brand reputation among enthUSiasts and collectors. As the summer winds down, we're encouraged by the strong performance of our retail locations. Our stores within a store concept at One Drivers Club in West Palm beach and our pop up in Nantucket 10 Easy street both prove that immersive, community centred retail is a powerful complement to our digital sales channel. These locations give cUStomers the opportunity to see, touch and drive our vehicles firsthand while engaging with our design process in a way that online channels simply can't replicate. These stores have contributed to backlog growth, generated ready new sales and accelerated the conversion of inventory into cash. JUSt as important, both locations have served as hubs for community engagement that strengthened brand awareness and created new relationships within two of the wealthiest and most influential markets in the US. This early success reinforces our conviction that retail is a scalable path to filling our factory and driving cash generation and can be financially jUStified with as few as two vehicle sales per month. Both the MUStang program and our expanded retail strategy highlight how ECD can drive high average selling prices by elevating product mix without compromising on quality or the cUStomer journey. I would now like to touch on two significant financial developments that occurred in June that we believe strengthen ECD's strategic position and long term growth trajectory. First, we announced a set of proactive initiatives to rightsize our cost structure and enhance operational efficiency. Following a comprehensive review of our capital allocation expense base, we've implemented targeted cost savings, refined inventory management practices to improve working capital velocity and negotiated a 12 month grace period on debt service obligations with our lenders. These steps were intended to create a leaner, more agile operating model, one that supports disciplined growth, providing preserves cash and positions US to execute on our long term strategy with greater resilience. By streamlining spend and unlocking resources, we are better equipped to invest in the parts of the bUSiness that drive revenue growth, margin expansion and shareholder value. Second, we secured a 500 million equity facility earmarked for the strategic accumulation of bitcoin as our primary reserve asset. Alongside funding for growth initiatives and general corporate purposes, this financing option gives US the flexibility to draw capital at our discretion, aligning with our view that bitcoin is a next generation store of value. Importantly, it also enables US to further engage the crypto native cUStomer demographic, a community with significant purchasing power that increasingly seeks to diversify into real world luxury assets like our cUStom built vehicles. Building on our recent partnership with Bitpayer to accept cryptocurrency payments, we've launched a targeted promotion. The first 21 cUStomers to purchase a new build USing bitcoin will receive a $21,000 credit towards upgrades. We see this as both a marketing catalyst and a brand differentiator that bridges digital wealth with a high touch real world productive experience. With that, I will now pass the call over to Vicki to review our financial results.

Vicky Hay - Chief Financial Officer - (00:12:17)

Vicky thank you Scott. It's a pleasure to be here. There are significant opportunities ahead for the company in the coming quarters and I'm excited to be part of that journey. I'd also like to thank Ben for his His continued support during the transition and. I look forward to working closely with him in his new role. My immediate priorities are regaining and maintaining compliance with our NASDAQ listing, ensuring that the company remains appropriately funded for both current operations and future expansion, and focusing On timely SEC filings while strengthening our internal controls and processes. Coupled with the cost-streamlining initiatives already underway, these actions should have a positive. Impact both financially and from a regulatory. Perspective in the second half of the year. Now to discuss second quarter results. ECD reported second quarter revenue of $7 million Million, a $$0.5 million increase over Q2. 24 driven by higher revenue build. This represents the highest quarterly revenue in the company's history. Gross profit for the quarter was 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. We are proactively engaging with vendors to. Identify efficiencies and potential savings in these areas going forward. Total operating expenses were $4 million, a $1.4 million increase year over year, primarily. Driven by higher G and A expenses. G and A expenses were $3.7 million. Up $1.4 million from Q2 24 largely. Due to higher non cash equity compensation expense. Loss from operations was $2.6 million, an. Increase of $2.1 million from the prior year period. Net loss was $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 $0.4 million. Gain from debt converted into preferred stock. Loss per share was $0.11 compared to $0.06 in the prior year. Quarter Regarding our balance sheet and liquidity position, as of June 30, 2025 cash and cash equivalents totaled $0.6 million compared. With $1.5 million as of December 31 24. For the first six months of 2025. Operating activities used 4.2 million million of. Cash, 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. These were partially offset by repayments of the Agile and Floor loans. During the second quarter, we entered into an amendment and exchange agreement with an. Institutional investor allowing the exchange of amounts. Outstanding under the convertible notes into convertible preferred stock. At closing, the holder converted the August 2024 convertible notes, including principal and accrued interest, into 4,000 shares of convertible preferred stock, thereby improving our shareholders deficit position. I'd like to close by discussing some. Subsequent developments following the close of the quarter. On August 6, we received a delisting. Notice from NASDAQ as a result of. Non compliance of continued listing requirements. Prior to receiving this notice, we had. Already engaged an advisory firm to help us navigate this process both efficiently and effectively. To regain and maintain compliance and. Support our broader growth initiatives, we have taken the following additional steps. In In July, we filed an S1 registration statement to register 300 million shares in connection with our previously announced $500 million equity line of credit. This facility also provides flexibility to diversify. Our treasury strategy, including the potential use. Of Bitcoin for both inbound and outbound transactions. We exchanged $12 million of convertible debt. Into preferred stock against two separate transactions. And finally, we have raised an additional $1.7 million of equity capital to fund. The business and to also improve our shareholder deficit. These steps substantially deleverage our balance sheet. Significantly reduce cash interest obligations and will. Accelerate our path to positive cash flow. Taken together, these efforts will allow us to regain and maintain compliance with nasdaq. Strengthen our balance sheet, and combined with. The continued G and a streamlining and planned margin improvements position us strongly as we enter the second half of the year. Our focus remains on executing our growth. Strategy and delivering long term value to our shareholders. This concludes our prepared remarks. I'll now hand back to the operator to open the line for questions.

OPERATOR - (00:17:59)

Thank you ladies and gentlemen. The floor is now open for questions, if you would like to ask a question, please press Star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press Star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key again, that is Star one to register a question at this time. Our first question this morning is coming from Theodore o' Neill of Litchfield Hills Research. Please go ahead.

Theodore o' Neill - (00:18:33)

Oh, thanks very much, Scott. I wonder if you could give us some more details on the Mustang rollout and what you see in the pipeline and deliveries for the next 12 months.

Scott Wallace - Co Founder, Chief Executive Officer and Chairman - (00:18:46)

Yeah, the Mustang has been a great. Learning experience for us, as most new products are as we introduce them. The blend of introducing classic cars with modern customization and performance is not a challenge many people want to take on, but we kind of thrive in that. And we're fortunate of 67 technicians, that, you know, they kind of like doing this as a thing at the weekend. So this is. This is fun to them. What we face with some challenges was it was in terms of the part. Supply chain at first when we did. It, it didn't quite fit our production model in terms of the quality specifically to fit and finish on alignment. So we had to kind of flip. The model in real time and pivot quickly. And we changed the model to go into a panel model that we fabricate with the technicians in house now. But, yeah, I mean, once we got through it, it was a great product and we didn't honestly expect it. We didn't have anything to do with. The award we received. The client took delivery the car and took it to an event, and it won first place. So we were really proud of that. And I'm pleased with the technicians who put the efforts in. And, yeah, the backlog's building. You know, we've got more in production now. They're in the production lines. We speak. We're pivoting and learning every time we do something to build the Mustang. And, you know, it took us, I'd Say, comfortably took us, you know, three or four years to get the Defender, where we really got that nailed down. The Mustang, we're much further ahead because we're much more involved with the business. We're much more involved in skill base that's within the team. So, yeah, I think by unit number Two or three, we'll be turning that into, like, a fairly streamlined production model.

Theodore o' Neill - (00:20:18)

Okay. And on the. This is a financing question. On the Bitcoin, $500 million financing. Is that really more of a marketing tool or financing tool or some combination of the two?

Scott Wallace - Co Founder, Chief Executive Officer and Chairman - (00:20:34)

Thanks, Theo.

Vicky Hay - Chief Financial Officer - (00:20:35)

It's a combination of the two. So obviously, as Scott mentioned in his. Remarks, we do have a lot of. People with a lot of crypto and bitcoin currency. So it is something that we do want to start getting payments in and then obviously building a reserve through this equity line of credit that we have. The equity line of credit won't be. Used solely for our crypto strategy. It will also be used for expansion. Of the business, opening new retail units. Opening further lines of production as well so that we can expand the company as well. So it'll be a combination effort with the. With the facility once it goes live.

Theodore o' Neill - (00:21:12)

Okay, thanks very much.

OPERATOR - (00:21:17)

Thank you. At this time, I'd like to turn the floor back over to Mr. Wallace for closing comments.

Scott Wallace - Co Founder, Chief Executive Officer and Chairman - (00:21:23)

We appreciate everyone's time today and your. Continued interest in ecd. Please visit our website, ECD Auto Design. To stay up to date on our. Latest projects and feel free to reach out to our IR site on the. Same website if you have any questions. Have a great day.

OPERATOR - (00:21:40)

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.