Q3 2023 Microvast Holdings Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Microburst third quarter 2023 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation investment community professionals have the opportunity to participate in a question and answer session.
And 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 Rodney over then I grew less as director of Investor Relations. Please go ahead.
Thank you operator, and thank you everyone.
With me on today's call are Mr. Yang.
Chairman and CEO.
Does that work.
Chris Webster, our Chief Financial Officer.
How does this call microburst issued its third quarter 2023 earnings press release, which we found on the Investor Relations section of our website.
<unk> done a microcap stock comp.
In addition, we have posted a slide presentation to accompany management's prepared remarks.
As a reminder, please note that we will be making forward looking statements on this call.
Payments are based on current expectations and assumptions that reflect our views only as of today.
They should not be relied upon as representing our views for subsequent date and we undertake no obligation to revise or publicly release the results of some revisions to these forward looking statements and licensees, 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 SEC.
<unk> our annual report on Form 10-K filed on March 16 2023.
Q filed earlier today.
In addition, during today's call, we may discuss non-GAAP financial measures, including adjusted gross profit adjust.
Adjusted net loss and adjusted EBITDA.
And believe are useful as supplemental measures of micro best performance.
These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included in our press release.
A webcast of this call will also be available on the Investor Relations section of our company website.
And with that I will turn the call over to Mr. <unk> for opening remarks.
Thank you.
And thank you everyone for joining in on today's call.
I would like to start off with a high level overview of the quarter.
Before providing some operational highlights.
I will then turn the call over to Jack Mohr, our president.
Oh I'll discuss additional operational update.
And as some of our key successes for the quarter.
Although by Chris Webster, our Chief Financial Officer, who will discuss our financials in more detail.
Hello, Dan.
Our outlook for Q4 and as the full year 2023 before opening the call up for questions.
Please turn to slide four.
As I cover a few highlights for the third quarter.
We posted a one 7% of revenue growth year over year in Q3 2023.
Delivering revenue of 81 million.
This exceptional increase comes from incredible amount of growth for our commercial vehicle business from our customers in both Europe and Asia Pacific.
We continue to expand our gross margins.
Steven significant double digit improvement and adjusted gross margin of 24, 2%.
14 percentage points increase year over year.
Yes.
We closed the third quarter was the retro backlog.
$678 7 million.
So I mean by a strong order intake.
$67 5 million from our commercial vehicle business.
Our current backlog is made up of more than 84% $83 five empower self.
Driven by strong demand in both U S and the European market.
The backlog continues to display how are 53 empower technology has been readily integrated into both the energy storage and the commercial vehicle segment or white.
Turning to slide five.
One of our most significant operational achievements in Q3 and was the rapid commercialization of our $53 five on herself from the new horizontal phase 3.1 expansion.
We are producing.
Marine qualified products at a more than a 70% utilization with an update at year end target of at least 90%.
Additionally.
Our yields have.
Pass it.
Our production targets and we will continue to focus on improvements.
Even beyond this target level.
I would like to provide an exciting updates regarding our who just assuming your capacity.
As you will see from slide six we plan on an expansion a one gigawatt hour of wisdom automated a flexible production line.
Well be able to produce both our safety 3.5, empower sales as well as our 48 I'm kind of a high power sales.
Neither by our growing customer base.
So our hydro <unk> Oh, yes.
This new line already have funding in place.
It requires a minimal incremental investment.
It provides us substantial capacity increase or actually meet our highest sales demand.
I would now like to turn the call over to our President Jack Ward, who will discuss some of our key operational updates so partnerships and shipments for the quarter.
Yeah.
Thank you Mr. <unk> and thank you all for joining us today.
Now please turn to slide seven as I cover additional updates from the third quarter.
To begin I'd like to share the latest developments on our U S operations for Clarksville Phase <unk>, we're approaching domestic operations with a determined and proactive mindset. Our goal is to ensure a seamless ramp up for our U S operations to achieve this we have extended factory acceptance test.
For various components of the production line incorporating those lessons learned and improvements from our <unk> $3. One line. While this has led to a slight delay in F. L. P and sets the stage for an accelerated ramp up after installation.
On the construction side.
We are nearly at completion.
You already have the building now Andre joined occupancy and only minor work remains to be done in the fourth quarter.
We're also in good position with our production equipment, where we're using the same equipment finished out running with great success on our who shall street one mine.
We have approximately 30% of the equipment onsite cartsville with majority of the remaining equipment, having already been shipped.
We have set our sights on 2024 with targets to deliver qualified itself and generate section 45 back sorry credits from the second quarter of 2024 onward.
Drawing on our commercial commercialization success, who show we have set the ambitious goal of achieving target production yields for cartsville in the second quarter.
On the personnel side of things, we're continually enhancing our U S workforce with battery specific expertise and skills to support launch efforts.
Our U S headcount has increased by nearly 350% year over year as we move towards bolstering our domestic presence in 2024. Additionally, we are pleased to share that almost one third of our exceptional Clarksville team is made up of U S veterans.
Expect more updates regarding our U S operations in the future.
In the meantime, I'd like to provide a brief update regarding our Windsor, Colorado Energy storage Assembly facility.
<unk> has successfully produced the first of our 4300 energy storage containers and has completed a successful customer factory acceptance test.
Now, let's turn our attention to fighting despite facing challenges such as customer project delays, we achieved an order intake of $67 5 million and continued our year over year upward trajectory and revenue growth.
But.
Moving on to slide nine.
To discuss some of our major project development, we are excited to announce our collaboration.
On a prototype E bus with OEM auto car, which will utilize our $53 five amp hour Gen. Four pack auto cars, a leading Turkish company right now for producing passes military vehicles and industrial products.
Microvax is also expanding its partnership with re automotive to clip there al CV platform with our 53, 5% and power Gen. Four pack really is a cutting edge next gen EV automotive technology company offering modular electric trucks and platforms.
<unk>.
In the quarter, we made deliveries of our $53 five to empower our Gen. Four pack South Korea and partnership with Hydro <unk> for their E bus platform high here as a major player in the bus export industry with units and more than 100 countries and territories across Southeast Asia Middle East Africa.
Erica East Europe, and the Americas.
Furthermore, we signed the general purpose.
General purchase agreement for our 'twenty, one amp power Gen III pact with GBM group, the leading Indian bus Oems.
We're pleased to report that we've delivered approximately 100 megawatt hours to JDM group during the quarter.
<unk> had another excellent quarter and expanding our business.
Yes.
Looking ahead to the quarter, we anticipate adding significant multiyear contracts as illustrated in slide 10 also these multiyear projects utilized at $53 5 million power cell, which we have previously mentioned is the linchpin of our multiyear high growth phase we expect to file.
As these contracts in Q4 at which point they'll.
Be included in our backlog.
I will now hand, the reins over to our Chief Financial Officer, Craig Webster to delve into our financial performance in the quarter.
Thank you Scott and thank you definitely also tuning yet I'll spend the next few minutes discussing our Q3 2023 financial results. Please turn to slide 12, and I will summarize the main line items from our Q3 P M.
We haven't called it a really solid quarter with Q3 revenue up $80 1 million an increase of 107% from 38 6 million in Q3 'twenty to 'twenty two.
This growth was driven primarily by strong sales demand in both our European and Asia Pacific markets. The commercial vehicle as Oems continue to increase that vehicle rents.
On a year to date basis revenue was $202 million up 45% from $139 7 million in the prior year nine month period.
Our gross margin improved to 22, 3% in Q3 2023 compared to five 2% in Q3 2022.
After adjusting for noncash share based compensation expense and cost of sales.
<unk> gross margin increased to 24, 2% in Q3 2023 compared to 10, 2% in Q3 2022, that's a 14 percentage point improvement.
With the continuous yield and utilization improvement on the phase III long lines, we expect to maintain and possibly improve these margin levels.
<unk> expenses were $44 7 million in Q3, 2023 compared to $39 6 million in Q3 2022 on.
On a year to date basis operating expenses were $119 9 million a decrease of 10% from 133 4 million in the prior.
Yeah nine months period.
After adjusting for noncash SBC expense in SG&A.
Adjusted operating expenses in Q3, 'twenty to 'twenty, three was $30 3 million compared to $22 3 million in Q3, 2022 an increase of $8 million.
Mainly due to increasing head count cost and attracting battery specific expertise as we expand our U S business and begin ramping into the next year.
Adjusted operating expenses year to date was $72 8 million compared to $75 1 million in the prior year nine months period on.
On a year to date basis. This reduction in non-GAAP operating expense was mainly due to higher share based compensation expense in the prior year nine month period.
GAAP net loss was $26 2 million in Q3 2023 compared to a net loss of $36 5 million in Q3 2022.
After adjusting for noncash SBC expense and changes in fair value of our warrant liability.
The net loss was $10 3 million in Q3 2023.
Compared to an adjusted net loss of $17 4 million in Q3 2022.
On a year to date basis, adjusted net loss was $13 2 million compared to an adjusted net loss of 61 4 million in the prior year nine months period.
You are starting to see that as we scale our business, we are making significant progress in narrowing our losses and I expect this trend continue in Q4 and beyond.
Yes.
Yeah.
The impacts of these adjustments is shown in slide 13, a reconciliations of these non-GAAP metrics to the most comparable GAAP metrics are included in a table at the end of our earnings press release.
Yeah.
Slide 14 shows the geographic breakdown of our revenue for Q3 totaled 23 compared to the prior year period as you can see our European business showed outstanding 455% year over year increase and accounts for 24% of our revenue up from just 9% a year.
Year ago as key customers begin their vehicle rems.
We continue to I expect substantial growth in our EMEA revenues, especially for the $53 five and pallets L with much of this already in backlog.
As I've mentioned, we have a couple of multiyear commercial vehicle nominations that would further add to our backlog position in Q4.
When we added the impulsive contributions from China, and Asia Pacific customers. Our overall commercial vehicle revenues have grown 45% year to date versus 2022.
On the U S side revenues are behind where we wanted them to be.
Deliveries on projects have been pushed out slightly we will begin deliveries in Q4, and they should then make a meaningful contribution to overall 2020 full revenues.
Turning to slide 15.
Our expansion in gross margin in Q4 is a crucial proof point and the maturity of our operations and the growing contribution from our commercial introduction of our new 53.5 empower style.
We expect to see further positive impacts to gross margin as who show phase III one approaches full utilization in Q4 and while it is Clarksville phase I starts qualify deliveries from Q2 next year.
The backlog number 678 7 million with over 84% of this for the 53.5 and power cell gives us good visibility into the utilization rates for our capacity expansions.
Around 65% of the backlog is booked in 'twenty 'twenty four mostly for customers in Europe, and the U S and as Mr. <unk> mentioned, we now need to launch a flexible phase III, two line and who Joe to bring on more capacity to meet demand for 48 hour and $53 five M panel itself.
<unk>.
As you know our Golden rule is that we only add capacity if supported by demand.
This new line is situated in the same building as the phase II part one line, which was sized to support a total of 12 pizza what Atlas.
The lead time to add a new phase III two line will be around 4% to six months with the majority of the investments being an additional production equipment.
Net cash used in operating activities during the quarter was $29 3 million, which was primarily due to operating loss and working capital negative free cash flow in the quarter of $89 3 million resulted from these net operating cash outflow as well as our capital investment program the majority.
Dorothy This capital expenditure in Q3 was to fund our capacity expansion in Clarksville, which totaled $38 3 million.
We also have capital expenditures totaling $21 6 million relating to improvements to our existing facilities and ongoing R&D projects.
Looking ahead, we estimate that full year capital expenditures will remain in the range of $190 million to $210 million and will primarily be used for the court. So phase one a capacity expansion.
Turning to slide 16, we detail the financial resilience of micro battles.
Our total debt outstanding of $99 5 million is relatively modest and you can see that the maturity profile requires only 5 million to be repaid in the fourth quarter.
Looking further out total debt repayments of up to 31 December 2025 are a very manageable 40.2 million all of this debt is for our China operations and all of it have any recourse to our U S holding structure or assets.
We have approximately $70 million available to draw down in order to continue expansion and growth at our Suzhou facility. After this being used for the estimated $75 million investment in the phase III <unk> two expansion.
This incremental investment and a flexible automated line allows us to respond to both demand. So the 53.5 empower style that will like seed phase III point won't capacity and.
Also to deliver full J temper myself, so the hydrogen fuel cell market turning to the U S. Operations. These currently remain free of leverage and we continue to make solid progress on a project debt financing, which is to be secured by the phase one expansion.
We anticipate that facility to be in place during Q4.
With that I will turn it back over to Mr. Doyle to review our outlook.
Thank you Craig.
Please turn to slide 18, which provides a summary outlook for the upcoming months.
For the fourth quarter.
We expect our revenue to be in the range of $90 million to $100 million.
A 47% from Q4, a year ago as the midpoint.
Driving by increasing deliveries and production output from our EMEA and Asia Pacific commercial vehicle customers.
Okay.
We're also talking adjusted gross margin of 20% to 25%.
Additionally, we are targeting a further increase to our previous utilization at.
And the aim to achieve 90%, who Joe was 3.1 automated line.
Finally.
If you'll turn to slide 19.
We look at the full year guidance update due to a customer project delays.
Some revenue maybe combination it's been pushed it into early 2024.
We are providing an updated 2023 guidance for full year revenue to be in the range of.
292 million to $302 million.
Representing year over year revenue growth of 43% to 48%.
This is still a high growth year.
It's also worth noting.
<unk> always said, we have some revenue slippage net revenue we are delivering this year is at a much higher gross margin now we had anticipated.
Yeah.
As Greg just mentioned.
This means we have made real progress in narrowing our losses.
Yeah.
So some of our projected fourth quarter revenue our push into early next year. We continue to anticipate a strong revenue growth into 2024 provided by visibility through both our sales pipeline and the retro backdrop.
Is it external and operational results, we are seeing out of our newest whose those three why automated production line.
I'm, sorry say confidence to expand the capacity.
And our focus on the accelerated ramp at our upcoming Crossrail phase one a production facility.
We are seeing strong demand trajectory for Microsoft's battery solutions or wait.
And anticipate our substantial momentum in the first nine months of 2023 to carry forward as customer orders remained robust throughout the remainder of this year and into next.
Okay.
Although we look at to the final quarter of 2023.
The tangible deliverables, we ask you to judge.
Us by the.
Start of this year.
Have been mostly accomplished.
Okay.
We are having a high growth year.
We have record backlog that supports another high growth year in 2024.
Most of that backlog.
As for 53 empower so when she is being rapidly industrialised.
We are improving gross margins and approaching gross margin levels that our mature scale competitors achieve.
We have reached a qualified production operations in our phase three one line and it had a very successful milestone this sizable investment.
This last item.
Difficult for me to fully come me they challenges in branch in battery technologies to the point of a scaled advanced manufacturing.
This is our third successful launch for the new technology as well as their own dedicated line.
And the Crossrail face one <unk> won't be a copy of which over $3 one production line.
Before we close.
I'd like to take a moment to stack our entire team provides to for their hard work and dedication.
This quarters results are a testament to your commitment to excellence and I'm. So proud of what we have accomplished together.
You'll have all rising to the occasion and it exceeded expectations continue to innovate deliver for our customers.
And support each other so second thing.
Thank you for all that you do.
I'm truly grateful to be part of this team.
And now I will turn the call back to.
Operator to start the Q&A session.
Okay.
Yeah.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
The first question comes from somebody agility with H C. Wainwright. Please go ahead.
Oh, Hey, guys. Good afternoon, thanks for taking my questions.
Good to see gross margin improvements beyond what you are targeting and I understand you're Indian humans and some are promised me maybe at me, but is there any other items that.
Boost to gross margins and more importantly.
What are you targeting gross margins now that you are seeing this.
Alrighty.
Hey, Andrew.
She like the rest.
So I'd say that that's true.
So you you nailed a couple of them right. So the utilization is really good utilizations that we've not really acute befool run phase.
Phase one phase two.
The actual yield.
Better than we thought it would be at this stage of the year.
Or the fact to.
Material prices has definitely helped.
As well.
And what we're trying to achieve in Q4 with maintained that.
20% to 25% and that's just the gross margin.
And if we do that.
We should narrow those losses, even said.
Got it.
Unbilled AR Lux win.
Little bit of a push out Oh.
Any factors that Oh stood out for the BD or was it just a regular.
Do you lose that you expected.
No.
Isn't it.
Bill do you want me to do that when are you going to take it.
You do it you can do it.
Okay. Thank you.
The the reason there isn't an exact mentioned it a little bit earlier is that the b.
The equipment go through factory acceptance test.
I'm trying to sign which is basically about three.
3000 pieces of equipment that our team go through.
And make sure it passes.
So we wanted to make some modifications that we learnt about from putting 3.1 operation.
Actually going to accelerate the ramp up when it comes to the U S. So.
You probably think about this is a slight push out quite a bit.
Actually benefits you, because it's actually quicker and cheaper to ramp through Q2.
Understood Thanks for that.
On the did.
Did you mean that occurred in Q2 higher and J P M group.
Do we have any feedback from them or is it too early to have any sort of feedback from what for them and so that's an issues there.
You're talking about customer feedback from hiker and J P M.
Right.
There's a little bit closer to 80 units yes.
These these have been longtime customers that just tells you that they love us they love the products when they're coming back for more.
Okay.
And then there was a slight increase.
And R&D expense.
The quarter related to previous quarters.
The Zip code.
Well look at any one time items in this.
It is really difficult to hear the last part of that question can you.
Was there at any one time.
How does it work.
There'd been William R&D expense or was it just.
Should we expect these notes going forward.
Okay.
That was that's one time it makes sense and we.
And if you look at the changes in.
Okay.
We are adding more head count.
You're seeing that on the U S. It is exactly.
Is that you referenced.
Okay, great good to see all the progress a good luck.
Thank you.
The next question comes from Sean Milligan with Janney. Please go ahead.
Nice quarter can you talk a little bit more about the project push outs that you're seeing in the fourth quarter.
You're kind of competence and timing for those being first half 'twenty four deliveries.
Because it looks like you know kind of roughly I guess like 50 to 60 million pushed out and just again when I give you the chance to reiterate your confidence in that was coming due in the first half of next year.
Yeah, you want to talk a little bit better.
Project Tonight, and I can just talk about sort of like the sort of minor issue back in Q1 of next year.
Sure.
This is Jack Yeah. These are just normal push them. So we do anticipate that landing in a 2024 are their habits.
Oh. This is just normal push and pulls of projects that we see from customers.
So they have to just mention on on Q4 will show them, which is really relevant is that.
You can see a lot bigger contribution.
From Europe, you've seen that already.
With like 20, 25% of Q3.
Europe's going to have a really solid Q4.
To the point where probably.
European revenues are going to grow like five eggs this year.
They know that they're going to carry on.
Celebrating into next year.
Most people like 53 point by then pair with zelle.
And then the backlog numbers rather than as I mentioned earlier.
Over 65% of backlog is there now.
Next year, that's mostly a European and.
U S customers.
As you know from our business we did.
The China Asia Pacific don't really do backlog. So what would also get into next year again as a.
Really solid contribution from Asia Pacific customer.
Okay. Thanks, Greg.
Really helpful.
I guess also kind of.
I can answer that.
Well a little bit.
Question about third quarter and fourth quarter with just phase one in China.
Can you talk about how the utilization here has ramped. This year you know I think I think it was said, it's like 70% now and targeting 90%.
Exiting the fourth quarter.
If you run that through and you kind of run through the legacy volumes in China. It seems like revenues would be a bit higher so it was some of that production.
Can you talk about if there's any production from phase one that isn't being recognized in the back half of this year because the shipments maybe too.
I don't know if the U S for storage containers or.
What's kind of being pushed into next year from that production profile.
Okay.
One is really turning out in 'twenty, one and power so.
We're getting reasonable utilization of phase one line.
If you're reading through like utilization doesn't matter to us what you've seen is a much higher that's why I mentioned the European contribution in Q3, that's pretty material.
53 point Goddamn Hela cells.
Then what we ought to be producing in Q3.
He's like sales that are going into inventory that we're going to deliver in Q4 in Q1.
And then same thing same thing for Q.
Q4.
And then phase III three.
3.1 swap it like Super Phase 3.1.
Based on the utilization that you talked about good third quarter in the fourth quarter. It seems like you're building a lot of sell inventory.
For the first half of next year.
Just kind of trying to see if you could comment on that like how much sell inventory you're building.
Weighted to pack deliveries early next year.
Yes.
Sure building inventory for orders so that to meet the.
But your guidance that we're giving you for Q2 and then also my bank level, what is it we need to deliver to Q1 as well.
Okay.
Yeah, we can take that offline too and then.
I guess can you talk about the bidding.
Bidding environment in the U S for battery storage.
You talked about potential for additional bookings in the fourth quarter related to key commercial vehicle contracts.
Just wanted to get your thoughts on.
The utility scale storage bidding environment, So Clarksville next year.
Yeah.
You want to go.
Yeah, I would love to answer that Greg.
Yes. Please.
Yeah, Hey, Sean this exact cord.
Yeah, we can continue to see really strong demand in the energy storage sector.
Unique advantage of Oh, microvax and the market is that corp, so which enables our customers to achieve that additional a domestic content, which gives them the ability to capitalize another 10% of their projects. So we continue to see strong demand.
Our strong pipeline built up and down.
And great results from that market. The <unk>. The overall market in the U S has I think dissipated a little bit of headwinds, let's see raising interest rates and the appetite for tax equity.
It's still a good number to market globally.
Okay. Thank you.
Yes. The question would be do you anticipate being able to sign additional.
Off take in the U S for 'twenty, 'twenty, four and storage or are you.
Getting more on 25 and 26 at this point.
Hi.
Yes, we're working diligently to to.
<unk> increased our order intake for all the capacity for Clarksville, one area and as well as looking at opportunities for our watch the expansion.
Okay, Great I'll hand, it over and come back if there's an opportunity.
Once again, if you have a question. Please press Star then one.
Next question comes from Colin Rusch with Oppenheimer. Please go ahead.
Yeah.
Oh, thanks, so much guys. Yeah, so just with the extension and who show I want to make sure I understand. So then you've got another $92 million of cash available that's not showing up on the balance sheet right. Now. So we've got plenty of cash to cover that $35 million from what I can see and then you know as you.
Execute on the on the ramp here.
Like you you you know you called out a process and the Clinton said pretty well Oh, you know codified at this point. So I just wanted to understand and sort of risk around either the financing or the equipment set in a ramp up that you guys are seeing on the horizon as you execute against that plan.
Okay.
She might take the financing part and I think if you don't mind could you just ramp a pump that's super important.
Yeah.
Holly thank.
Thank you so calling you'll write them the availability, we've got 17 million to fund more kind of peg in China. It more than covers what we need for that.
Phase three point too.
We've added into the working capital line in China as well.
The reason you can do it is because like you delivered on your promos you told the bank say, partly funded $3. One you couldn't build a building you can get the equipment and you can install it you can get decent utilization you can get a good yield and like you got customers and the growing right. So.
We did all those things.
Now we need to have capacity and there's more.
Understood that.
We its funded them and I think at that point.
Hand, it over to him because he will talk you through just how critical that ramp up is and what is involved in and why its really then relevant to look at you know financing on the U S as well.
Yeah, that's calling about the to build a factory.
From a laboratory you know they ticked knowledge you know.
And to move to the product, it's not an easy job.
It could be a you know you build it.
Sample cells in the laboratory, that's only a few or I didn't know if that makes it much easier.
If you're building a factory you have to you know consistency control is really really critical you'll have to make every battery is identical.
And every store has the same performance.
And that you know the the yield is really a big cost saver for the.
The manufacturing because of you.
Your yield is low you you waste your net profit not gross profit.
And down.
So the yield that you know these things make batteries like them.
It literally like a 14th steps if you Wanna get a 19, 7% yield you would have to make every step 99 point.
90%, if you times everything you know its 14 times together you get a 97%.
That means you know the every step that you would have to control very precisely it's.
It's you know, it's a big job.
And not easy to make a battery.
But Microsoft's you know right now you know, we'd really we'd get there.
And we you.
In the first line that we do line, we spent a lot of effort to refine the process to refine the you know your appointment.
It's what I explained, though Chi Tak.
For Clarksville production line we.
Thank you Natalie.
Lei do they vary through you know the U S E T Tech.
Cause the equipment moved from China across the water to United States, that's much harder to you know to fix the problem.
That's why you see they'd be it'll be postponed.
That's super helpful and as you've ramped up the 23 and a half and half hour. So you know obviously getting to the kind of yields and consistency is a key benchmark for your customers can you talk about how it's impacting both your commercial vehicle customers and your ability to close deals as well as what's happening.
With some of the stationary power customers that are looking for it. So that's a wrap and a higher density product.
You mean, the commercial commercial vehicle customers.
For both right I mean, what I'm. The question is as you've proven out you know the the viability of the manufacturing operation is that improving your leverage with customers to close deals and even potentially start driving some price increases.
Oh every customer they were they will do the very detail you know the factory.
And you know about it.
And you have to get a high score you know you'll have to go to a or over 90, you know this score over 19, when he gets impacted.
That's.
You can be a qualified supplier.
Not only for our production line, that's that you couldn't control your.
The.
You know your deliverable.
Deliverability, you know how your delivery or your consistency you know deliver.
And all kinds of factors you know the a big chunk of it.
They're sick automotive was most 50 you know the process.
Excellent and then I guess the last one as you know with the stationary power products.
You've gotten into you know kind of the fabrication of that are there any surprises that have come up are in terms of performance for fabrication that number should be attended to.
That answers that question.
Yeah, Yeah, no. We've been really pleased Colin are with the performance of the 53 and a half hour ourselves.
10 years too.
<unk> be a dramatic performance improvement over over the competition with.
With energy retention as well as round trip efficiency the round trip efficiency.
Efficiency is just so critical because these stationary projects a continuing cycle every day for 'twenty to 'twenty, seven and a half years. So if you're losing one or 2% of efficiency. You can you know you can amortize that over the life of the Powerpoint so that value proposition continues to resonate.
But the market really strong.
Thanks, so much guys.
This concludes the question and answer session I would like to turn the conference back over to Mr. <unk> for any closing remarks. Please go ahead.
Yeah. Thank you everybody to join us thank.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Thanks.
Yeah.
Hum.
[music].
Right.
Yeah.
[music].
Yeah.
Yeah.
Yeah.
Yeah.
[music].