ECD Automotive Design, Inc. (NASDAQ:ECDA) is a leading provider of custom-built, one-of-a-kind luxury vehicles, specializing in the restoration and modification of iconic models such as Land Rover Defenders, Range Rover Classics, Jaguar E-Types, Ford Mustangs, and Toyota FJs. Since its inception in 2013, the company has established itself as a trailblazer in the automotive restoration industry, offering clients an unparalleled level of craftsmanship, innovation, and personalization.
Business Overview and History ECD Automotive Design was founded in 2013 with the goal of providing clients a one-of-a-kind immersive luxury automotive design experience for each of its unique custom builds. The company’s headquarters, known as the “Rover Dome,” is a state-of-the-art 100,000-square-foot facility located in Kissimmee, Florida, where a team of 89 skilled employees, including 72 ASE-certified technicians, bring each client’s vision to life.
ECD’s highly trained technicians and master-certified ASE craftsmen hand-build each vehicle from the ground up, replacing substantially every single component and customizing every aspect to the customer’s specifications. The company primarily earns revenue from the sale of customized vehicles directly to customers, as well as by providing repair or upgrade services and selling extended warranties.
In 2020, ECD’s operations were significantly impacted by the COVID-19 pandemic, which caused disruptions to the global supply chain and increases in material and shipping costs. To mitigate these challenges, the company added additional shipping routes and stocked up on raw materials prior to the temporary closure of its facility. Despite these obstacles, ECD was able to resume operations at full capacity by June 2020, demonstrating its resilience and adaptability in the face of unprecedented circumstances.
In December 2023, ECD completed a business combination with EF Hutton Acquisition Corporation I, a special purpose acquisition company (SPAC), which resulted in the company’s shares being listed on the Nasdaq Capital Market under the ticker symbol “ECDA.” As part of the transaction, ECD became a wholly-owned subsidiary of the combined company, which was renamed ECD Automotive Design, Inc. Although EF Hutton Acquisition Corporation I was the legal acquirer, ECD was deemed to be the accounting acquirer, and the historical financial statements of ECD became the basis for the historical financial statements of the combined company. This milestone event marked a significant chapter in ECD’s evolution, providing the company with additional resources and visibility to further accelerate its growth and expand its reach.
Financial Performance ECD Automotive Design has demonstrated impressive financial performance, with revenues increasing from $12.3 million in 2021 to $15.1 million in 2023, representing a compound annual growth rate (CAGR) of 22.8%. During this period, the company has maintained a strong gross profit margin, which averaged 26.5% over the past three years.
For the fiscal year ended December 31, 2023, ECD reported revenue of $15.12 million, with a net loss of $1.60 million. The company’s operating cash flow (OCF) and free cash flow (FCF) for the same period were both negative $5.01 million.
For the six months ended June 30, 2024, ECD reported revenues of $17.2 million, a 161.3% increase compared to the same period in the prior year. Gross profit for the six-month period was $5.3 million, reflecting a gross margin of 30.8%. The company’s ability to command higher average selling prices, coupled with improved production efficiencies, contributed to the significant margin expansion.
In the most recent quarter ended June 30, 2024, ECD reported revenue of $8.87 million, representing a year-over-year growth of 129.4%. The net loss for the quarter was $926,070, with operating cash flow of negative $1.21 million and free cash flow of negative $1.20 million. The substantial increase in revenue was primarily driven by a $46,600 increase in average selling price per vehicle and increased production due to efficiency improvements. The higher average selling price contributed $1.16 million to the revenue increase, while the production increase added $3.0 million.
Liquidity As of June 30, 2024, ECD Automotive Design had a cash balance of $5.66 million. The company’s debt-to-equity ratio stood at -0.96 as of December 31, 2023, indicating a negative shareholders’ equity position. The current ratio and quick ratio as of June 30, 2024, were 0.87 and 0.33, respectively, suggesting potential short-term liquidity challenges.
To improve its financial flexibility, ECD entered into a loan agreement on May 15, 2024, for up to $1.5 million in floor plan financing. This additional credit line is expected to provide the company with more working capital to support its operations and growth initiatives.
Operational Highlights and Growth Initiatives ECD’s success is underpinned by its commitment to innovation, quality, and customer satisfaction. The company’s in-house team of skilled technicians and engineers work closely with clients to bring their vision to life, with over 2 million possible design combinations to ensure each vehicle is truly one-of-a-kind.
In recent years, ECD has expanded its product portfolio to include the Jaguar E-Type and Ford Mustang, leveraging its expertise in classic vehicle restoration and modification. The acquisition of certain assets of BNMC Continuation Cars LLC in April 2024, including the Brand New Muscle Car trademark, further bolstered the company’s capabilities in the Mustang segment. This strategic move is expected to enhance ECD’s production of Mustangs in 2024 and 2025, allowing it to capitalize on the growing demand for custom classic American muscle cars.
To drive continued growth, ECD has embarked on several strategic initiatives, including the launch of a retail showroom strategy to own and operate brick-and-mortar locations, as well as the expansion of its marketing and branding efforts to reach a wider audience of automotive enthusiasts. The company’s recent collaboration with Roush, a renowned provider of high-performance engines and automotive products, is expected to further enhance the performance and desirability of its custom Mustang offerings.
In 2024, ECD has opened new marketing channels, including outreach events, on-site events with market influencers, and expanded relationships with the press and social media influencers. The company also plans to expand into international markets such as Europe, Canada, and the United Arab Emirates, further diversifying its customer base and revenue streams.
Product Segments and Financial Metrics ECD Automotive Design operates primarily in one reportable segment, designing and selling customized luxury vehicles. The company’s revenue is generated through two main product categories: Builds and Warranty/Other.
The Builds category represents the majority of ECD’s revenue, contributing 90% and 94.3% of total revenue for the three and six months ended June 30, 2024, respectively. This category saw significant growth, increasing 108.9% and 150.3% for the three and six months ended June 30, 2024, respectively, compared to the prior year periods. The growth was driven by a 46.6% and 52.65% increase in average selling price per vehicle, as well as increased production efficiency. Gross profit margin for Builds improved to 33.37% and 32.08% for the three and six month periods, up from 32.8% and 23.4% in the prior year.
The Warranty and Other category, which includes revenue from extended warranty sales and repair services, represented 10% and 5.7% of total revenue for the three and six months ended June 30, 2024, respectively. This category experienced remarkable growth, increasing 714% and 875.3% for the three and six months ended June 30, 2024, respectively, compared to the prior year periods. Gross profit margin for this segment was 17.2% and 9.8% for the three and six month periods.
Overall, ECD’s revenue grew 129.4% and 161.3% for the three and six months ended June 30, 2024, respectively, driven by the strong performance in both the Builds and Warranty/Other categories. Gross profit margin improved to 31.8% in both periods, up from 31.8% in the prior year. However, the company experienced higher operating expenses, particularly in general and administrative costs related to public company compliance, which resulted in a net loss of $926,070 and $2.48 million for the respective periods.
Risks and Challenges While ECD Automotive Design has demonstrated impressive growth and resilience, the company faces several risks and challenges that investors should consider. The custom vehicle restoration industry is highly competitive, and the company must continually innovate and differentiate its offerings to maintain its market position. Additionally, the company’s reliance on a limited number of large customers could expose it to concentration risk, should any of these key clients reduce or cease their business with ECD.
The company’s recent transition to a publicly traded entity also brings additional regulatory and compliance requirements, which could strain its resources and divert management’s attention from core business operations. Furthermore, the ongoing global supply chain disruptions and fluctuations in material and labor costs could impact the company’s ability to maintain its profit margins.
ECD’s financial position, particularly its negative shareholders’ equity and relatively low liquidity ratios, may pose challenges in terms of financing future growth and managing short-term obligations. The company will need to carefully manage its cash flow and potentially seek additional funding sources to support its expansion plans and working capital needs.
Outlook and Conclusion Despite the challenges, ECD Automotive Design remains well-positioned for continued growth and success. The company’s strong brand recognition, reputation for quality, and innovative product offerings have positioned it as a premier player in the classic vehicle restoration and modification market. With the additional resources and visibility provided by its public listing, ECD is poised to further expand its reach, diversify its customer base, and capitalize on emerging trends in the automotive enthusiast community.
The company’s recent strategic initiatives, including the acquisition of BNMC Continuation Cars LLC assets, expansion into new marketing channels, and plans for international growth, demonstrate its commitment to long-term success. The significant revenue growth and margin improvements in recent quarters also highlight ECD’s ability to execute on its business strategy effectively.
As ECD Automotive Design continues to execute on its strategic initiatives and navigate the evolving industry landscape, investors will be closely monitoring the company’s ability to maintain its strong financial performance, enhance its operational efficiencies, and deliver on its long-term growth objectives. With a focus on innovation, craftsmanship, and exceptional customer experience, ECD is well-equipped to solidify its position as a leader in the luxury vehicle restoration market. However, the company will need to address its financial challenges, particularly in terms of profitability and liquidity, to ensure sustainable growth in the coming years.
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