ECD Automotive Design, Inc. SEC 10-K Report

ECD Automotive Design, Inc., a leading custom-car builder specializing in the Restomod sector, has released its annual 10-K report. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces. ECD is renowned for its high-quality, fully-customized, 1-of-1 luxury vehicle designs, including classic motor vehicles such as Land Rover Defenders, Jaguar E-Types, Ford Mustangs, and Toyota FJ40s.

Financial Highlights

• Revenue, net: $25.2 million, increased by 29.1% from the previous year driven by higher average selling prices and increased production.
• Gross Profit: $5.9 million, representing a gross margin of 23.4%, up from 23.2% in the prior year due to increased average selling prices and unit sales.
• Loss from operations: $(4.5) million, increased by 196.2% compared to the previous year, primarily due to higher general and administrative expenses and advertising costs.
• Net loss: $(10.8) million, a significant increase from the $(1.2) million net loss in the previous year, largely due to increased interest expenses and operating costs.

Business Highlights

• Company Overview: ECD specializes in the Restomod sector, focusing on classic motor vehicles, including Land Rover Defenders, Jaguar E-Types, Ford Mustangs, and Toyota FJ40s. The company is known for its high-quality, fully-customized, 1-of-1 luxury vehicle designs.
• Production Facilities: The company's headquarters, known as the 'Rover Dome,' is a 100,000-square-foot manufacturing facility located in Kissimmee, Florida. ECD operates two production lines and has plans to expand to a third line to increase production capacity.
• Sales Units and Production Volume: Since its inception, ECD has completed over 600 projects and currently has 67 contracted projects in its pipeline. In 2024, the company delivered 82 vehicles, including Land Rover Defenders, Land Rover Series, and Range Rover Classics.
• New Product Launches: In 2024, ECD entered the Classic Ford Mustang and Toyota FJ40 markets, expanding its portfolio of customizable classic vehicles.
• New Production Launches: The South Line, a flexible production line, commenced operations in July 2022, allowing for a broader range of products to be built. ECD also launched the ECD Boutique division, focusing on higher-priced projects like Porsche 911s and Jaguar Low Drag E-Types.
• Customer Experience: ECD offers a unique 'white-glove' immersive experience, with a CRM system that engages clients every two weeks during the 12 to 14-month build process, allowing for extensive customization and client involvement.
• Target Market: ECD targets high net worth individuals who are less sensitive to economic cyclicality, providing them with a luxury automotive design experience.
• Future Outlook: ECD plans to increase its annual revenues to between $70.0 million and $80.0 million and achieve a gross margin between 35.0% and 40.0% once the third production line is fully operational. The company also aims to enhance its retail presence with new locations in West Palm Beach, FL, and Nantucket, MA, by 2025.
• Electric Vehicle Integration: ECD is working with Ampere EV to introduce customizable electric drivetrain systems across its vehicle portfolio, aligning with industry trends towards electrification and sustainability.
• Supply Chain and Vendor Relationships: ECD has developed a robust vendor network, including exclusivity agreements with key suppliers like Ampere EV for electric drivetrains, ensuring a steady supply of components necessary for its custom builds.

Strategic Initiatives

• Merger and Public Listing: ECD has undertaken a merger with EF Hutton Acquisition Corporation I, resulting in ECD becoming a publicly traded company.
• Product Line Expansion: The company has expanded its product lineup by introducing new models such as the Ford Mustang and Toyota FJ, and has entered into strategic partnerships with Black Dog Traders and Black Bridge Motors to enhance its product offerings and market reach.
• Manufacturing Capabilities: ECD has expanded its manufacturing capabilities by leasing a new 100,000 sq. ft. facility in Kissimmee, Florida, to increase production capacity and efficiency.
• Capital Management: ECD has engaged in various capital management activities, including issuing senior secured convertible notes to raise capital, with a December 2023 Convertible Note and an August 2024 Convertible Note, both accruing interest and convertible into common stock. The company has also entered into a Securities Purchase Agreement with Defender SPV LLC, issuing shares and warrants as part of the financing arrangements. Furthermore, ECD has been actively managing its liquidity through customer deposits and deferred revenue, and has secured a revolving line of credit with First National Bank of Pasco to support its working capital needs.
• Future Outlook: Looking ahead, ECD plans to continue its growth strategy by opening new marketing channels in 2025, including outreach events and leveraging retail locations. The company aims to enhance its brand presence and customer engagement through strategic partnerships and marketing initiatives. ECD also intends to focus on improving its financial position by managing its debt obligations and exploring additional financing options to support its expansion plans and operational needs.

Challenges and Risks

• Limited Operating History and Financial Losses: ECD has a limited operating history and a track record of financial losses. The company expects to incur significant expenses in the near term, which could impact its ability to forecast and plan for capital requirements effectively.
• Growth Management: The company may struggle to manage its growth effectively, which could lead to an inability to fulfill orders timely, adversely affecting its business and financial condition.
• Business Strategy Implementation: ECD's success depends on its ability to introduce new products, expand into new markets, and manage costs. Failure to execute its strategy could negatively impact financial results and stock price.
• Customization Risks: ECD's vehicles are highly customized, and any failure to meet customer expectations could harm its reputation and business prospects.
• Supply Chain Dependence: The business relies heavily on the availability and quality of base vehicles, which are subject to price fluctuations and availability issues, potentially affecting delivery timelines and costs.
• Demand Prediction: ECD's ability to predict future demand for its vehicles is limited, which could lead to inaccurate financial forecasts and inventory management challenges.
• Lack of Diversification: ECD's focus on a limited range of vehicle models and manufacturers increases its vulnerability to industry downturns and changes in consumer preferences.
• Intellectual Property Risks: The company may face challenges in protecting its proprietary technology and processes, which could lead to competitive disadvantages.
• Cybersecurity Threats: ECD is exposed to risks from cyberattacks and data breaches, which could disrupt operations and harm its reputation.
• Regulatory Environment: Changes in regulations related to vehicle retrofitting could impose additional costs and operational challenges.
• Market Competition: The luxury automotive market is highly competitive, and ECD may face challenges in maintaining its market position.
• Financial Risks: ECD may require additional financing to support its capital-intensive business, and failure to secure such financing could impact its operations.
• Economic Conditions: General economic downturns could reduce consumer spending on luxury vehicles, affecting ECD's sales and profitability.
• Public Company Challenges: As a public company, ECD faces increased regulatory and compliance costs, which could strain resources and distract management.
• Convertible Note Risks: The conversion of the Convertible Note and exercise of warrants could lead to significant dilution of existing stockholders' interests.

Management's strategies to address these challenges include enhancing brand recognition, improving operational efficiencies, and seeking additional financing to support growth initiatives. However, the effectiveness of these strategies remains uncertain given the evolving risk landscape.

SEC Filing: ECD Automotive Design, Inc. [ ECDA ] - 10-K - Apr. 15, 2025