Q1 2022 Microvast Holdings Inc Earnings Call

May 16, 2022

Thank you for standing by this is the conference operator welcome to the Michael That's first quarter 2022 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded.

Thank you for standing by. This is the conference operator. Welcome to the Michael Vast first quarter, 2022 earnings call. As a reminder, all participants are in list and on remote and the conference is being recorded.

After the presentation, community professionals have the opportunity to participate in the question and answer session. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Sarah Alexander, Microwess General Counsel. Please go ahead.

After the presentation community professionals have the opportunity to participate in the question and answer session.

To join the question queue you May Press Star then one on your telephone keypad.

If you need assistance during the conference call you may signal, an operator by pressing star zero.

I would now like to turn the conference over to Sarah Alexander Microburst General Counsel. Please go ahead.

Thank you operator, and thanks to the audience for joining us today, Mr. Yang Lu Chief Executive Officer will begin today's call with some opening remarks crab Webster, who was recently appointed as our Chief Financial Officer, and Sasha Kelter, born who was recently promoted to the position of President.

Thank you, operator, and thanks to the audience for joining us today. Mr. Yang Wu, Chief Executive Officer, will begin today's call with some opening remarks.

CREV Webster, who was recently appointed as our Chief Financial Officer and Sasha Kelturborn, who was recently promoted to the position of president, will host today's call. Leon Zing, our former Chief Financial Officer, who has transitioned into an advisory role with Microwast, is also on the line.

Today's call Liang, Zhang our former Chief Financial Officer, who has transitioned into an advisory role with micro Bath is also on the line.

ahead of this call, Microwast issued its first quarter 2022 earnings press release, which can be found on the Investor Relations section of our website, ir.microwast.com. In addition, we have posted tonight's accompanying slideshow presentation to our website. As a reminder, please note that we will be making forward-looking statements on this call. These statements are based on current expectations and assumptions and reflect our views only as of today.

How did this call microburst issued its first quarter 2022 earnings press release, which can be found on the Investor Relations section of our website IR Dot Microburst Dot Com. In addition, we have posted Tonight. The accompanying slide show presentation to our website as a reminder, please note that we will be.

Making forward looking statements on this call. These statements are based on current expectations and assumptions and reflect our views only as of today.

They should not be relied upon as representative about views as of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

They should not be relied upon as representative about views as of any subsequent date and we undertake no obligation to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For further discussion of the material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC, including our annual report on Form 10-K filed on March 29th 2022.

For further discussion of the material risk and other important factors that could affect our financial results, please refer to our filings with the SEC, including our annual report on Form 10K, filed on March 29, 2022.

In addition, during today's call, we may discuss non-GAAP financial measures, including adjusted gross profit, adjusted net loss, and adjusted EBITDA, which we believe are useful as supplemental measures of microvast performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or an isolation from GAAP results.

In addition, during today's call, we may discuss non-GAAP financial measures, including adjusted gross profit adjusted net loss and adjusted EBITDA, which we believe are useful as supplemental measures of Microsoft's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or.

Or in isolation from GAAP results.

These non-GAAP measures have been reconciled to their most comparable GAAP metric in the tables included at the end of our earnings press release.

These non-GAAP measures have been reconciled to their most comparable GAAP metric in the tables included at the earnings at the end of our earnings press release, a webcast replay of this call will also be available on the Investor Relations section of our company website.

A webcast replay of this call will also be available on the Investor Relations section of our company website. With that, I will turn the call over to Mr. Wu for some opening remarks.

With that I will turn the call over to Mr. <unk> for some opening remarks.

Thank you Sarah.

Thank you, Sarah. First, I would like to take a few minutes to address the leadership changes that we are launching last month.

I would like to take a few minutes to address the leadership changes that we announced last month.

Leon has been the CFO of Microbot for the last 12 years, and has been an integral part of building this company.

Yeah. It has been the CFO of Microsoft.

For the last 12 years.

And it has been an integral part of building this company.

We would not be where we are today without his leadership guidance and a steady hand.

We will not be where we are today without his leadership, guidance, and steady hand.

I want to personally thank him for his years of loyal service and for his continued service as an advisor and as a director.

How long do you personally thank him for his years of lowest Davis.

It's continuous.

Our adviser.

And as a director.

<unk> has been involved with the microbiome for overtime.

Craig has been involved with the Microword for over 10 years, and he knows our business and industry very well. I'm confident that if he has a skill set required to take the Microword to the next level, and I look forward to working with him, he has new role as the TFO.

And he knows our business and the industry very well.

On the top line.

He has the skills that are required to get micro lab to the next level and I look forward to working with him.

<unk> new role as the CFO .

So I'll start John and Michael Bob.

Joshua joined the Michael Voss in 2016 and had been in the entire part of our growth strategy.

16.

And it has been an integral part of our growth strategy.

in the Western Hemspher. He will assume responsibility for the company safety data operations in the new role as a president.

In the Western Hemisphere, he will assume responsibility for the company operation and a new role as president.

I will cover some of the company's Chief Executive Officer.

I will continue to serve as the company's chief executive officer. This new leadership structure will enable me to focus on Michael Vod's strategic direction.

This new structure.

Structure, well enabled me to welcome Michael Bob two digits.

King.

I'm puzzled in this.

I'm confident that this team will best position Michael Vars to execute on the opportunities in front of us.

This team well.

And Michael loss to a few of them.

I wanted to get in front of us.

Tasha will touch on our business results and a quick or reviewing financial performance.

Oh, yeah, well touch on our business results and a great well review the financial performance.

In both people in a few moments, however, I would now like to turn the call over to Leon. Thank you all.

In more detail in a few months.

However, I would now like to turn the call over to Liam.

Thank you all.

Thank you Mr. Wolpe. First, it has been an honor to serve Mark West as his chief financial officer. I'm very proud of the buildings we have built. And I'm excited about the company's future.

Thank you Mister well first it has been Oh no sorry.

<unk>.

Chief Financial Officer, I'm, a very proud off at the beginning.

We have built.

I'm excited about the Companys future.

When I joined the micro web in 2010, the company had very few employees and no revenue. Only this would elect...

When I joined the microwave in 2010.

Company had what are your favorite employee and no revenue.

Only.

Electrification rigid.

Over the last 30 years, we built a strong team and worked together to execute that reach.

Oh, well the basket trial years, we've built a strong team and work together to execute that Richard.

I'm blessed to have been a part of this journey, and I'm even more excited about the opportunity that remains in front of Markowitz.

I'm blessed to have been a part of this journey and I'm, even more excited about the opportunity that it would be.

You brought up a microwave.

Kurt has been your wallet in the microwave as a member of our board of director since 2000 and acquire.

Current has been involved in the market world as a member of our board of directors since 2012. P and I have developed a great working relationship over the last decade.

And I hope you will agree.

Great working relationship with our boss a decade.

He knows our business and the industry very well. And I'm confident he's the right person to step into the role of the Chief Financial Officer.

He knows our business and the industry were aware.

And I'm confident he's the right person to step into the role of Chief Financial Officer.

and to help lead the martial world into his next go space.

To help lead the market with into his next phase.

I look forward to working closely with him to ensure the smooth transition.

Looking forward to working closely with him.

We ensure a smooth transition.

I'll have the utmost confidence in micro-edged future. I'll look forward to continuing to serve this company as a direct

Oh, hey, with the at most covenants Marshall with future I look forward to continuing to serve these covenant.

Watching together with correct, Yeah, My view and why the rule.

working together with Craig, you might knew at the wide-reloom, and I will continue to support Michael S at the Sher Holder for many years to come.

And we will continue to support a microwave.

For many years to come.

Thank you to our shareholders for your covenant support and the patient.

Thank you to our shareholders for your confidence, support and the peace.

and thank you to the micro-stube around the globe. It has been a true pleasure to work with each and every of you. With that, I will turn the call over to Shasha, President of the microwave.

And thank you to the microwave to keep around the globe.

It has been a true pleasure to work with each and every of you.

With that I will.

Turning the call over to Sasha further then of microwave.

Thank you laid out on a personal note I have very much enjoyed working with you. The last few years and I am pleased that you have chosen to continue forward with micro bus at the <unk>.

Thank you Leon. On a personal note, I have very much enjoyed working with you the last two years. And I'm pleased that you have chosen to continue forward with Microvast as a director and in an advisory capacity. Your historic knowledge of this business is vast.

Director and in an advisory capacity.

Historical knowledge of this business is fast.

I'm excited to step into the role of president with a renewed focus on executing our international growth strategy I enjoying your challenges and I'm ready to move the company to the next level.

I'm excited to step into the role of President with a renewed focus on executing our international growth strategy. I enjoy new challenges and I'm ready to move the company to the next level.

Everyone. Please turn to slide number four of the Powerpoint presentation. We have just published as I cover a few highlights from the first quarter.

Everyone, please turn to slide number four of the PowerPoint presentation we have just published. As I cover a few highlights from the first quarter.

We posted 145.5% revenue growth during the third quarter, delivered $36.7 million in Q1 2022. Our first quarter performance exceeded expectations as our team reeled together to get as much product solutions out of the door before the COVID lockdown so the Asian and China were...

We posted 145, 5% revenue growth during the quarter delivered $36 $7 million in Q1, 2022, our first quarter performance exceeded expectations as our team real together to get as much product solutions out of the door before the Covid Lockdown, so to Asia and China.

Yeah.

This is a robust revenue growth despite many macro headwind.

This is the robust revenue growth despite many macro-hats.

A big part of our growth in the first quarter was Asia Pacific.

A big part of our growth in the first quarter was Asian Pacific.

We have seen our market chain India increasing with our partners, and this was one of the biggest contributors to ex-China growth in the first quarter. As an example, we received a 10.1 million US dollar order for various e-boss solutions from Ashkosh Leland.

We have seen our market share in India, increasing with our partners and this was one of the biggest contributor to ex China growth in the first quarter. As an example, we received a $10 1 million U S. Dollar order for various E bus solutions from Asics Leland.

In addition, orders from our multi-year European project were strong across the new battery solutions that were recently announced.

In addition orders from our multiyear European project were strong across the new battery solutions that'd be a recently announced.

We ended the first quarter with a strong backlog of 120.8 million US dollars. A result of a healthy order intake of 62 million.

We ended the first quarter with a strong backlog of $128 million.

Oh, and healthy order intake of $62 million.

We are very excited about the prospect of further increasing to our backlog on the coming quarters. Our forecasted contact revenue remains at a healthy 2.5 billion US.

We are very excited about the prospect of further increasing our backlog in the coming quarters, our forecast of contact revenue remains at a healthy $2 5 billion U S dollars.

Except backlog a full cost of contract revenue is compromised entirely of customers located outside of China.

Except that lock our forecasted contact revenue is compromised entirely of customers located outside of China

We continue to make progress behind the scenes to advance our relationships with leading OEMs globally and will continue our efforts to grow our forecasted contact revenue.

We continue to make progress behind the scenes to advance our relationships with leading Oems globally and will continue our efforts to grow our forecasted contract revenue.

When we refer to forecast the contract revenue, we are describing backlog plus management estimates.

When we refer to forecast the contract revenue, we are describing backlog plus management estimates. For revenue, we expect to realize from existing contractual relationships with customers.

For revenue, we expect to realize from existing contractual relationships with customers.

Most of these contracts include estimate volume requirements. However, they do not typically include a volume commitment we expect to realize current forecasted contract revenues between 2022 and 'twenty So Eddie Wong.

Most of these contracts include estimate volume requirements. However, they do not typically include a volume commitment. We expect to realize current forecasted contact revenues between 2022 and 2031.

The first quarter did come with some talent challenges. The most prominent one being rapidly increasing raw material prices driven by supply chain disruptions as well as the worldwide inflation.

The first quarter did come with some challenges the most prominent one being rapidly increasing raw material prices driven by supply chain disruptions as well as the worldwide inflation. We are actively monitoring these trends and doing what we can to mitigate this risk including entering into long term supply contract identifying new.

We are actively monitoring these trends and doing what we can to mitigate this risk, including entering into long-term supply contract, identifying new and or additional sources of supply, and increasing our selling prices wherever possible. However, this is a trend that we anticipate continuing well into 2020.

And or additional sources of supply and increasing our selling prices wherever possible.

However, this is a trend that we anticipate continue well into 2022.

In addition, I would also note that the semiconductor supply chain has not yet normalized and there were further supply chain disruptions in the outer industry caused by the conflict in eastern Europe .

These challenges do not necessarily impact our business directly. However, they do impact the timing of the OEM, demanding for our battery solutions. As many customers are unable to complete production of existing vehicles or finalizing the various vehicle testing in the development phase due to trip shortages or other supply chain issues, which in turn delays the

These challenges do not necessarily impact our business directly however, they do impact the timing of the OEM demanding for our battery solutions as many customers are unable to complete production of existing vehicles. We're finalizing the various vehicle testing in the development phase due to chip charters, what other supply chain issues.

Which in turn delayed demand for our products.

I will touch on our capacity expansion project more in a moment, but they are well underway.

I will touch on our capacity expansion projects more in a moment, but they are well underway.

In addition, as was discussed during our last earnings call. We launched two new battery cells and a new battery pack during the first quarter, which would be a key driver of revenue growth going forward internationally.

In addition, as was discussed during our last earnings call, we launched two new battery cells and a new battery pack during the first quarter, which will be a key driver of revenue girls going forward. International.

Please turn to slide number five, which highlights some of our key partnerships in the commercial vehicle market, like the vehicle group, even some in others. We are moving forward with our announced corporations and preparing right now our global battery production lines for various vehicle SOPs within the next 12 months. Next, please.

Please turn to slide number five which highlights some of our key partnerships in the commercial vehicle market likely weaker group Iva and others. We are moving forward with our announced corporations and preparing right now our global battery protection lines for various vehicle S. O piece within the next 12 months.

Next please turn to slide number six.

which outlines some of our incoming order activity in G1. In addition to the 10.1 million order from Asker's Leland mentioned earlier, we also have a stable business growth with our existing customer base and partners like, as an example, Oshkosh Wright Buds, ZF, working long. In serial and new development project with $51.9 million USD order bill.

Which outlines.

Some of our incoming order activity in Q1. In addition to the $10 1 million Order from Africa Zealand mentioned earlier, we also have a stable business growth with our existing customer base and partners like as an example, Oshkosh Wright bus said F working alone.

Cereal and new development project with $51 9 million U S dollar order value.

Slide seven is an overview of the new power and energy battery cells in a battery pack, we announced during Q1.

Flight 7 is an overview of the new power and energy battery cells. And a battery pack we announce during Q1. These products enable our customers to optimize the vehicle design in terms of energy density and cycle life, delivering overall improved performance and reducing the total cost of ownership by preserving fast-changing capability.

These products enable our customers to optimize vehicle design in terms of energy density and cycle life, delivering overall improved performance and reducing the total cost of ownership by preserving fast charging capabilities.

Both sales solutions are rated over 5,000 cycles at 25 degrees. We expect these new generation products to be critical drivers of our future revenue growth.

Both cell solutions are rated over 5000 cycles at 25 degrees. We expect these new generation products to be critical drivers of our future revenue growth.

Moving on to slide number eight.

We have presented an overview of our engagement with Tursuit that was announced last week. Tursuit is a leader in the certification world and we are pleased to partner with them on one of the first sustainable assessments in the battery industry.

We have presented an overview of our engagement with <unk> suit that was announced last week to suit as a leader in its certification world and we are pleased to partner with them on one of the first sustainable assessments in the battery industry World Tour Stewart has completed and analyze all cooperation of our operation which will.

Tustuit has completed an analyze of our cooperation, which will use as a baseline to measure our progress towards sustainability goals. Going forward, this is very important. The next phase of the project will include a deep dive into identifying areas where we can improve sustainability in our manufacturing processes and in our global supply chain.

Use as a baseline to measure our progress towards sustainability goals going forward. This is very important the next phase of the project will include a deep dive into indentified areas, where we can improve sustainability in our manufacturing processes and in our global supply chain.

I will now turn the call over to Craig to review our financial performance.

Thank you, Sasha. Before I take you through our Q1 financial performance, I would just like to personally thank Leon for all these years of hard work and devotion to my project. I am fortunate to inherit from him a great finance team that has global reach and capabilities.

Thank you Sasha.

Before I take you through our Q1 financial performance I would just like to personally. Thank Leon for all these years of hard work and devotion to micro events I am fortunate to inherit from him a great finance team that has global reach and capabilities.

Additionally, Leon leaves me with a very strong balance sheet and an orderly and clean capital structure. As you know, we have exciting plans for our capital deployment over the next couple of years and beyond. I am excited by the opportunities that lay ahead for the company.

Additionally, Leon leaves me with a very strong balance sheet, and an orderly and clean capital structure.

You know we have exciting plans for our capital deployment over the next couple of years and beyond and I'm excited by the opportunities that lay ahead for the company.

Now, let me turn to our financials and I'll spend the next few minutes discussing our Q1 2022 financial results.

Now, let me turn to our financials and I'll spend the next few minutes discussing our Q1222 financial results.

Please turn to slide 10, and I will summarize the main line items from our Q1 P&L.

Please turn to slide 10 and I will summarize the main line items from our Q1 PNL.

First off revenue.

First off, revenue. I am pleased to report strong revenue growth in the first quarter, which grew 145.5% to 36.7 million from 14.9 million in Q1 2021. As Sasha mentioned, this performance exceeded our expectations and I will take you through the geographic breakdown in a later slide.

I am pleased to report strong revenue growth in the first quarter, which grew 145, 5% to $36 7 million from $14 9 million in Q1 2021.

Sasha mentioned this performance exceeded our expectations and I will take you through the geographic breakdown in the latest slide.

We posted gross profit of 13,000 in Q1222 compared to gross loss of 1.2 million in the prior period.

We posted gross profit of 13000 in Q1 2022 compared to gross loss of $1 2 million in the prior period.

After adjusting for non-cash settled share-based compensation expense, adjusted gross profit was 1.9 million in Q1222 compared to adjusted gross loss of 1.2 million in Q1221.

After adjusting for non cash settled share based compensation expense.

Adjusted gross profit was $1 9 million in Q1 2022 compared to adjusted gross loss of $1 2 million in Q1, 2021.

This translates into an adjusted gross margin of five 2% in Q1 2022 compared to a negative eight 3% in Q1 2021, a 13 five percentage point improvement.

This translates into an adjuster gross margin of 5.2% in Q1222 compared to negative 8.3% in Q1221. A 13.5% each point improved.

Yes.

Operating expenses were 43.4 million in Q1 2022 compared to 11.5 million in the prior period.

Operating expenses were $43 4 million in Q1, 2022 compared to $11 5 million in the prior year period.

The largest contributor to the increased operating expenses was share-based compensation expense, which tells of 26.2 million in the quarter.

The largest contributor to the increased operating expenses was share based compensation expense, which totaled $26 2 million in the quarter.

Office SBC explains 14.3 million is non-cash, and the balance is currently expected to be settled in cash this year.

All of this SBC expense $14 3 million is noncash and the balance is currently expected to be settled in cash this year.

Operating expenses also increased as the company added head count to support the planned growth initiatives and also incurred additional expenses related to operating as a public company compared to the prior year period.

Operating expenses also increase as the company added a head count to support the Plan Growth Initiative and also incurred additional expenses related to operating as a public company compared to the prior year period.

Net loss was $43 8 million in Q1 2022 compared to a net loss of $16 3 million in Q1 2021.

Net loss was 43.8 million in Q1 2022 compared to net loss of 16.3 million in Q1 2021.

After adjusting for non-cash settled share-based compensation expense and changes in fair value of our warrant liability and converbal notes, adjusted net loss was 29.1 million in Q1 2022 compared to 12.7 million in Q1 2021.

After adjusting for non cash settled share based compensation expense and changes in fair value of our warrant liability and convertible notes adjusted net loss was $29 1 million in Q1 2022 compared to $12 7 million in Q1 2021.

Adjusted EBITDA was negative $23 1 million in Q1, 2022 compared to negative $6 million in Q1 2021.

I just read a bit that I was negative 23.1 million in Q1 2022 compared to negative 6 million in Q1 2021.

Reconciliations of these non-GAAP metrics to the most comparable GAAP metrics are included in the tables at the end of our earnings press release.

Reconciliation to these non-gap metrics to the most comparable gap metrics are input in the table that the end about earnings press release.

Slide 11 further illustrates the impact of these adjustments.

Flight 11 further illustrates the impact of these adjusts.

As I just mentioned, we have substantial SBC expenses in Q1 of 26.2 million that is primarily related to stock option and and kept RSU awards under a plan that pre-existed our D-SPAC merger.

As I just mentioned, we had substantial SBC expenses in Q1 of $26 2 million that is primarily related to stock option and capped a rescue awards under our plan that Preexisted, our east bank merger.

The course of a modification made to these awards, we are required on the gap to expensive 12 PNL over a three-year period starting from July 23, 2021.

Because of a modification made to these awards we are required under GAAP to expenses 12 P. N L over a three year period, starting from July 23 2021.

We have adopted a prudent approach of only adjusting for the non-cash settled portion of this SBC expense.

We have adopted a prudent approach of only adjusting for the non cash settle a portion of its SBC expense.

Slide 12 shows the geographic breakdown of our revenue in Q1 this year compared to last.

Slide 12 shows a geographic breakdown of our revenue in Q1 this year compared to last.

As you can see, on a percentage basis, the biggest growth was in Asia-Pacific, X China, at a growth of 628% year over year. As Sasha mentioned, this was primarily driven by delivery to leading OEM customers in India.

As you can see on a percentage basis. The biggest growth was in Asia Pacific ex China at a growth of 628% year over year as Sachin mentioned this was primarily driven by deliveries to leading OEM customers in India.

It is worth noting that our China business still posted an 86% year over year growth and we expect that while this will remain a growing market for us. We currently expect the contributions from customers in Asia Pacific Europe , and the U S to grow at a faster rate.

It is worth noting that our China business still posted an 86% year-over-year growth. And we expect that while this will remain a growing market for us, we currently expect the contributions from customers in Asia-Pacific, Europe , and the US to grow at a faster rate.

Yeah.

I will now take you through our funding position and the cash movement in Q1 2022 which is on 513.

I will now take you through our funding position and the cash movement in Q1, 2022, which is on slide 13.

We started the call to a 536 million in cash, cash equivalent and restricted cash.

We started the quarter with $536 million in cash cash equivalent and restricted cash.

Net cash used in operating activities during the quarter was 24.9 million, which was primarily due to increased notes receivable and inventory due to our higher sales, as well as the management decisions that pay for certain raw materials earlier than usual in order to secure lower prices from our suppliers.

Net cash used in operating activities during the quarter was $24 9 million, which was primarily due to increased notes receivable and inventory due to our higher sales as well as a management decision to pay for certain raw materials earlier than usual in order to secure lower prices from our suppliers.

Our capex spend on who show 3.1 o'clock to 1.1 was $38 million during the quarter and we also invested a further $2 million into our existing facilities and R&D.

Our CAPEX spent on HUSEO 3.1 and CLOXAL 1.1 was 38 million during the quarter. And we also invested a further 2 million into our existing facilities and R&D.

This gives us approximately $470 7 million in cash cash equivalents and restricted cash at the end of Q1.

This gives us approximately 470.7 million cash, cash equivalence and restricted cash at the end of Q1.

Management estimates for our total capital expenditures in 2020 to remain in the region of $300 million to $350 million.

Management estimates for our total capsized expenditures in 2020 to remain in the region of 300 to 350 million. With most of this being allocated to our capacity expansion projects, which will bring online an additional 4kWh capacity per annum.

With most of this being allocated to our capacity expansion projects, which we will bring online an additional four gigawatt hours of capacity per annum.

These expansions, which are our growth drivers for the coming years are fully funded from our current balance sheet capacity.

These expansions, which are our growth drivers for the coming years, are fully funded from our current balance sheet capacity.

We will also be opportunistic to bring in bank financing. We have a growing fixed asset base, an unencumbered and our current debt levels are very low.

We will also be opportunistic to bring in bank financing.

We have a growing fixed asset base is unencumbered and our current debt levels are very low.

As regards the asset base, our capacity expansions are underpinned by our large and growing forecasted contracted revenues which will bring incremental cash flows in the future.

As regards to asset base out of capacity expansions are underpinned by our large and growing forecasted contracted revenues, which will bring incremental cash flows in the future.

To round off with close the quarter and a very strong cash position and with flexibility across our balance sheet and capital structure to raise more capital.

To round off, we close the quarter in a very strong cash position and with flexibility across our balance sheet and capital structure to raise more capital.

That will be done at a time that best suits us. And as it's needed to support future growth beyond our current, forging our expansion.

That will be done at a time that best suits us and as is needed to support future growth beyond our current four gigawatt hour expansion.

With that, I will turn it back over to Sasha to review the outlook.

With that I will turn it back over to Sasha to review the outlook.

Thanks, Craig Lastly, please turn to slide 15 first an update on the construction progress related to our ongoing manufacturing capacity expansions.

Thanks, Craig. Lastly, please turn to slide 15. First, an update on the construction progress related to our ongoing manufacturing capacity expansion.

Our manufacturing facility in Huzou is located in a near-boring province to Shanghai, and those far has not been directly impacted by the COVID lockdowns in China.

Our manufacturing facility in Who's who is located in a nearby near barring province to Shanghai, and thus far have not been directly impacted by the Covid Lockdowns in China.

I'm pleased to report that the ongoing construction related to this project remains on schedule and is on track to begin serial production by the first quarter of 2023. We expect production to begin ramp up in Q4 2022. We posted an updated time lapse to our social media accounts last week, which shows that the facility has reached 90% completion on the exterior side. This is an impressive feat against the backdrop of a difficult environment in China during the last few months.

I'm pleased to report that the ongoing construction related to this project remains on schedule and is on track to gain theory of production by the first quarter of 2023, we expect production to begin ramp up in Q4 2022, we posted an updated time lapsed to our social media accounts last week, which shows that the facility has.

Reached 90% completion on the exterior side. This is an impressive feat against the backdrop of a difficult environment in China during the last few months.

In addition, our ability to produce battery solutions was not immediately impacted from the lockdown and we have been able to continue production from our existing raw material inventory and Hulu.

In addition, our ability to produce battery solutions was not immediately impacted from the lockdown and we have been able to continue production from our existing raw material inventory in Huzo. However, logistics have created many challenges in getting products out of the door in Q2, both on the ground as well as by...

Logistics have created many challenges in getting product out of the door in Q2, both on the ground as well as by sea.

In addition, as at April progress and to me. It has also become increasingly challenging in a timely replenishment products and raw materials due to supply chain disruptions impacting our vendor as well as our tier network.

In addition, as I put a progress into May, it has also become increasingly challenging in a timely replenishment, production, and raw materials due to supply chain disruptions, impacting our vendor as well as our team network.

We expect these challenges will be temporary in nature. And as of right now, we believe we can make up the softness experience during the first half of Q2, once logistics normalize. We have finished goods in our warehouse that are ready to be shipped as soon as transportation can be arranged. We will continue to monitor this situation, closing.

We expect these challenges will be temporary in nature and as of right. Now we believe we can make up the softness experienced during the first half of Q2 once logistics normalized we have finished goods in our warehouse that are ready to be shipped as soon as transportation can be arranged we will continue to monitor.

This situation closely.

We expect Clarkswell to begin serial production in Q3 2023. Clarkswell is well on its way to meeting USMCA requirements, which will give us a competitive advantage in North America.

We expect Clarksville to begin CRE production in Q2, Q3, 2023, Clarksville is well on its way to meeting U S. MCA requirement, which will give us a competitive advantage in North America.

These global expansions will add additionally, four gigawatt hour of production capacity per year and will be mostly dedicated to our recent announced larger format battery cells.

These global expansions will add additionally 4G of our production capacity per year and will be mostly dedicated to our recent announced larger format batteries.

Moving forward, a key part of our strategy is to continue to focus on our manufacturing capacity expansion efforts outside of China. A critical component of this strategy is their visitification. Our supply chain is we justify our geographic presence and customer base. Once completed, these efforts will help insulate microvast from regional disruption in the future.

Moving forward a key part of our strategy is to continue to focus on our manufacturing capacity expansion efforts outside of China.

Critical component of this strategy is diversification our supply chain as we diversify our geographic presence and customer base. Once completed these efforts will help insulate microburst from reached note disruptions in the future.

Moving to the 2022 outlook, please turn to slide number 16.

Moving to the 2022 outlook, please turn to slide number six.

We experienced some challenges early in 2022, however, we are maintaining our guidance of 35% to 45% revenue growth compared to 2021, we continue to be very optimistic about our opportunities to grow forecasted contract revenue. This year and are looking forward to the full deployment of our newly launched products to further drive.

We experienced some challenges early in 2022. However, we are maintaining our guidance of 35 to 45% revenue growth compared to 2020.

We continue to be very optimistic about our opportunities to grow forecasted contact revenue this year and are looking forward to the full deployment of our newly launched product to further drive international sales.

International sales growth.

At the same time, we will further explore the market for energy storage solutions.

This market was valued in 2020 at 10.37 billion and is projected to globally reach 37 billion in 2027.

This market was valued at 2020 at $10 $37 billion and is projected to globally reached 37 billion in 2027.

We will also take advantage with our high performance battery solutions in the upcoming and growing fuel cell market. The market for fuel applications is projected to grow to 9.1 billion by 2027, versus 2.9 billion in 2022. Our fuel cell battery cell solutions have been already tested in very harsh desert conditions beginning of this year.

We will also take advantage with our high performance battery solutions in the upcoming and growing fuel cell market. The market for fuel cell applications is projected to grow to $9 1 billion by 2027 versus $2 9 billion in 2022, our fuel cell battery cell solutions has been already tested in very harsh desert.

Since beginning of this year.

Long term will live towards a positive future, with political leaders across the global coming together to reduce the country's carbon footprint and signing off Paris Agreement or releasing the new fit for 55 European legislation package that has given the boost to green and renewable technology.

Long term, we'll have to work the positive future with political leaders across the global coming together to reduce the country's carbon footprint and signing off Paris agreement or releasing the new fit for 55 European legislation package that has given a boost to green and renewable technologies.

By the way we are also exploring opportunities to participate in some of the recently announced governmental funded electrification projects in the United States as well as in Europe .

By the way, we are also exploring opportunities to participate in some of the recently announced governmental funded electrification projects in the United States, as well as in Europe .

With that positive outlook, I will turn the call back over to Sousa.

With that positive outlook I will turn the call back over to sell it.

Okay.

Thank you, Sasha. I would now like to ask the operator to open up the line for question and answer.

Thank you Sasha.

I'd like to ask the operator to open up.

The line for question and answers.

Thank you. We'll now begin the question and answer session. To join the question, Q, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys.

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Our first question is from Adam Jonas with Morgan Stanley . Please go ahead.

Hi, everybody thanks for the call and thanks for the details.

Hi, everybody. Thanks for the call. Thanks for the details. I got your full your CapEx outlook, but could you also provide any magnitude or cadence of

I got your full year Capex outlook, but could you also provide any magnitude or cadence of.

Opex as well, particularly what would what would consume cash and any visibility you can provide there would be it would be very helpful. Thank you.

OPEX as well, particularly what would consume cash any visibility could provide there would be would be very helpful. Thank you.

Sure Adam Craig here, not a problem. I think, and it will come as a surprise here that we'll run some cash outflow this year. I think, you know, our best estimate for that is that cash outflow from operations will be in the region of about $50 million. I'll show you one with slightly higher.

Sure Adam Craig here, not a problem I think.

And it won't come as a surprise to you that we'll run some cash outflow. This year I think you know our best estimate for that is that.

Cash outflow from operations will be in the region of about $50 million mm.

Q1 was slightly higher.

Then we'd anticipated because we took the decision to buy a lot more raw materials. You saw that from the inventory going up and our notes were receivable. That is an indicator for you that it won't be like that for the rest of you. That was a tactical management decision to go into the market earlier on raw materials.

Then we'd anticipated because we took the decision to buy a lot more raw materials and you saw it.

From the inventory going up and our notes receivable.

That is indicated to you that it will be like that for the rest of year that was a tactical management decision to go into the market earlier on raw materials.

Okay, I appreciate that and obviously given the cash.

Okay, I appreciate that. And obviously given the cast...

projections and the cost of the expansion.

Projections and the cost of the expansion.

in Housu and Clark's fill with your cash position. I would imagine.

And in what caused the zoo and Clarksville.

With your cash position.

I would imagine you'd be getting down to.

what you would define as minimum cash levels within a couple of quarters. I didn't know if you wanted them.

What you would define as a minimum cash levels within a couple of quarters I I didn't know if you wanted to.

I really, you know, obviously you're exploring lots of different options and there's there's all sorts of exciting

I really you know, obviously, you're exploring lots of different options and there's there's all sorts of exciting.

Opportunities to get low cost financing grants and the D O and others, but.

opportunities to get low cost financing from grants and the DOE and others, but

for another time perhaps, but can you remind us what you would say would be a comfortable range of

For another time, perhaps but but can you remind us what you would say would be a comfortable range of.

minimum cash to run the business before we bring in some new outside funds.

Minimum cash to run the business before we you bring in some some new outside funds.

Yeah, I think it.

Yeah, I think it's very similar to what Leon mentioned last time that we're looking to always have minimum cash around.

It's very similar to what Leon mentioned.

Last time that.

We're looking to always have minimum cash around.

$16,000, $200 million. Just so you know what we're doing with the balance sheet, Adam, it's this, right? So, you know, we've got cash.

One safety $200 million mm.

Just just so you know what we're doing with the balance sheet Adam It's this right. So.

We've got cash.

And then we're converting that cache into productive assets, fixed assets, right?

And then we're converting that cash into productive assets fixed assets right.

Once we do that, our fixed asset basis goes up. It's unleavoured.

Once we do that I think that.

Fixed asset basis goes up it's Unlevered <unk>.

And our fixed assets are backed by cash flows because we've already got the technology. So as we do that, we've then got the flexibility to add debt financing.

In our fixed assets.

<unk> by cash flows because we've already got the technology right. So as we do that we then got the flexibility to add debt financing and that's a lot easier if a bank to do because you're you're doing what you promised to do you build a building you put the equipment in there they see the customers come and they're not just <unk>.

And that's a lot easier for banks to do because you do what you promise to do. You build the building, you put the equipment in there, they see the customers come, and they're not just looking at a LTV on a building, they're looking at like what the cash flows associated with it. And that's the nice position that we're in. Next slide.

Looking at a LTV on a building they are looking at like what the cash flows associated with it and that's a nice position that we're in.

Makes a lot of sense I look forward to meeting you and thanks for the details.

Yeah look forward come to our Houston anytime.

Yeah, look, come to Houston anytime. We'll see you in New York next time as well. Thank you, guys.

What we will see you in New York next time as well.

Got it thanks, okay. Thanks.

Thanks Ara.

As there are no further questions I'll turn the conference back over to Sasha culture Barnes for any closing remarks.

As there are no further questions, I'll turn the conference back over to Sasha Keltaborn for any closing remarks.

Thank you all for joining today and we wish you a great Pleasant evening, Thanks, a lot.

Thank you all for joining today and we wish you a great and pleasant evening. Thanks a lot.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

This concludes today's conference calls. You may disconnect your lines. Thank you for participating and have a pleasure.

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