Q4 2023 Microvast Holdings Inc Earnings Call

April 1, 2024

Your conference call.

At this time all participants are in a listen only mode.

And the conference is being recorded after the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Microburst Investor Relations. Please go ahead.

Okay.

Ed.

None: Thank you for standing by and welcome to Microburst fourth quarter, 2023, and four year conference call.

Thank you operator, and thank you everyone for joining us today.

With me on today's call are Mr. Yang Liu founder, Chairman and CEO and Mr. Craig Webster Chief Financial Officer.

None: At this time all participants are in a listen only mode.

The conference is being recorded after the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to micro vast Investor Relations. Please go ahead.

Mr <unk>, who will start off with a high level overview of the quarter before providing some operational updates Mr. Webster will then discuss our financials in more detail before handing it back to Mr. <unk> to address our first quarter 2020 for outlook and opening the call up to questions.

Ahead of this call micro vast issued its fourth quarter and full year 2023 earnings press release, which can be found on the Investor Relations section of the company's website IR Dot microburst Dot Com. In addition, we have posted a slide presentation to the website to accompany management's prepared remarks.

Speaker Change: Thank you operator, and thank you everyone for joining us today.

Speaker Change: With me on today's call are Mr. Yang Liu founder, Chairman and CEO and Mr. Craig Webster Chief Financial Officer.

Yang Wu: Mr <unk>, who will start off with a high level overview of the quarter before providing some operational updates Mr. Webster will then discuss our financials in more detail before handing it back to Mr. <unk> to address our first quarter 2020 for outlook and opening the call up to questions.

As a reminder, please note that statements made in this call are forward looking and based on current expectations and assumptions.

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

Yang Wu: Ahead of this call Microsoft's issued its fourth quarter and full year 2023 earnings press release, which can be found on the Investor Relations section of the company's website IR Dot microburst Dot Com. In addition, we have posted a slide presentation to the website to accompany management's prepared remarks.

Actual results may differ materially from expectations due to a variety of risks and uncertainties for more information on material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC.

Yang Wu: As a reminder, please note that statements made in this call are forward looking and based on current expectations and assumptions.

We may also discuss non-GAAP financial measures. During this call. These measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. These non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release.

Yang Wu: They should not be relied upon as representative of abuse for subsequent date and we undertake no obligation to revise or publicly release the results of any revision to these forward looking statements due to new information or future events.

After the conclusion of this call a webcast replay will be available on the Investor Relations section of Microburst website.

Yang Wu: Actual results may differ materially from expectations due to a variety of risks and uncertainties for more information on material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC.

Now I will turn the call over to Mr. <unk> for opening remarks.

Thank you Annie.

Thank you all for joining us today.

Please turn to slide three as a hub to a few highlights from our full year 2023 financial performance.

Full according to our key achievements in Q4.

I am pleased to say that we booked a retro revenue.

Yang Wu: After the conclusion of this call a webcast replay will be available on the Investor Relations section of Microburst website.

$386 6 million for the full year 2023.

This was driven primarily by substantial year over year revenue increases in our EMEA business.

Now I will turn the call over to Mr root for opening remarks.

Mr Root: Thank you.

Root: Thank you all for joining us today.

Which grew.

Revenue of 434% compared to 2022.

Mr Root: Please turn to slide three as I cover a few highlights from our full year 2023 financial performance.

We also saw double digit percentage growth in both APAC and China.

Before turning to our key achievements in Q4.

Root: I am pleased to say that we booked a record revenue of.

The overall business saw a top line increase of 50% year over year and we delivered.

Root: $306 6 million for the full year 2023.

This strong revenue performance at a high gross margin.

Root: This was driven primarily by substantial year over year revenue increases in our EMEA business.

Which increased to 90% from a full percent in the prior year.

I'm also very pleased with the results from Marvell, who those 3.1 expansion that was completed during the year.

Root: Which grew.

Root: Revenue of 434% compared to 2022.

Root: We also saw double digit percentage growth in both APAC and China, yes.

Starting in the second half of 2023, we weren't delivering quantify products to our diverse customer base from our latest the fully automated production line.

Overall business saw a top line increase of 50% year over year and we delivered.

This demonstrates that we can successfully industrialized our technology at scale.

Root: This strong revenue performance at a high gross margin.

Root: Which increased to 90% from a full percent in the prior year.

Please join me on slide five to go over our successes in the final quarter of the year.

I'm also very pleased with the results from <unk> 3.1 expansion that was completed during the year.

Along with some challenges that are we also faced we saw our highest revenue quarter.

Root: Starting in the second half of 2023, we weren't delivering quantify products to our diverse customer base from our latest the fully automated production line.

$104 6 million junk and 61% year over year, and we achieved an adjusted gross margin of 23, 5%.

This demonstrates that we can successfully industrialized our technology at scale.

We saw major successes in our commercial vehicle business expanding relationships with Oems worldwide. We are working with Neil manufacturers on testing our products for additional contracts in 2025.

Root: Please join me on slide five to go over our successes in the final quarter of the year.

Root: Along with some challenges that are we also faced we saw our highest revenue quarter.

And we have begun to gain meaningful traction in specialized and differentiated vehicle settlements.

$104 6 million junkin, 61% year over year, and we achieved an adjusted gross margin.

However.

The year also broad challenges, we saw a challenging financing environment.

23, 5%.

Root: We saw major successes in our commercial vehicle business, expanding our relationships with Oems worldwide.

And reduced energy storage contract through mutual reasons machine with a customer and an overall <unk> market.

Root: We are working with Neil manufacturers' on testing our products for additional contracts in 2025.

Sentiment.

In both the sector and for Ravi gross companies like ours.

Turning to slide six we have made some exciting business development in our commercial vehicle business.

Root: And we have begun to gain meaningful traction in specialized and differentiated.

<unk> settlements.

When we cede many new orders and are delivered to customer variety of our products.

Root: However.

The year also abroad challenges.

Knowing the strength of our technology portfolio.

Root: We saw a challenging financing environment and.

This included leading Oems, such as <unk>, and LG Mg and <unk> New energy.

Root: And reduced energy storage contract sort of mutual read as machine with a customer and an overall <unk> market.

Root: Sentiment.

Please join me on slide seven to go over some updates around our APAC operations.

Root: In both the sector and for rapid growth companies like ours.

Turning to slide six we.

As I mentioned in the opening.

Root: We have made some exciting business development in our commercial vehicle business.

Our <unk> phase three one automated line has been successfully brought online is producing quantified 53 point empower style.

Root: When received many new orders and are delivered to customer a variety of our products showing the strength of our technology portfolio.

And as our products are being delivered to customers. We do not expect significant additional payback associated with phase III, one going into 2004.

Root: This included leading Oems such as ever Star.

LG Mg and <unk> new energy.

The APAC business generated revenue of 2000 19 million in full year, two sentiment suite, increasing 18% year over year.

Root: Please join me on slide seven to go over some updates around our APAC operations.

Root: As I mentioned in the opening.

Our <unk> phase three one automated line has been successfully brought online is producing quantified 53 point empower style.

We anticipate that the APAC business well generate regional profitability.

As operations are now mature self funding and achieving sustainable gross margins.

Root: And as our products are being delivered to customers. We do not expect significant additional capex associated with phase III, one going into 2024.

We also expect a further revenue expansion year over year.

Our expectations are driving by two major components.

First is a market in China.

Root: The APAC business generated revenue of 2000 19 million in full year, 2023, increasing 18% year over year.

Where are we bringing in stable revenue from our established base our E bus Oems.

But we are also seeing promising expansion opportunities in the electrified a mining and the earthmoving segments.

We anticipate that the APAC business well generate regional profitability.

Root: <unk> operations are now mature self funding and achieving sustainable gross margins.

Our high power products offer performance advantages.

The second major contributors is Indian market, where do they <unk> settlements is growing rapidly and is supported by government incentives with some of our major partners expected to benefit.

Root: We also expect a further revenue expansion year over year, our expectations are driving by two major components.

Root: First is a market in China.

Root: Where are we bringing in stable revenue from our established base our E bus Oems, but.

Turning to slide eight.

We will go over some updates around our EMEA operations.

Root: But we are also seeing promising expansion opportunities in the electrified a mining and the earthmoving segment.

We saw electric find growth in Tucson, 'twenty three with the original revenues.

Root: Where our high power products offer performance advantages.

More than 434% year over year, we have a localized production of our VBA modules and anticipated customer demand will lead to increasing volumes we.

Root: The second major contributors in the Indian market, whereas the EBIT settlements is growing rapidly and is supported by government incentives with some of our major partners expected to benefit.

We also expect additional revenue growth in the region of 2024.

Heaven narrowed our losses in 2023, we also have our sights set on original breakeven for the coming year.

Root: Turning to slide eight.

We will go over some updates around our EMEA operations.

We saw electrifying gross in 2023 with the original revenues up more than 434% year over year, we have localized production of our VBA modules and anticipated customer demand will lead to increasing volumes were.

In addition to a developing pipeline of the new and exciting commercial vehicle customers.

We see several palace for continuing growth in 2020 for one of those is <unk>.

Higher <unk>.

Root: We also expect additional revenue growth in the region of 2024.

<unk> volume from <unk> and <unk> platforms.

As we have seen continued expansion and a demand in the segment were also obtained settlements demand and are working with a leading week.

Root: Haven't narrowed our losses in 2023, we will also have our sights set on.

Root: Original break even for the coming year.

Refuse truck OEM with the demo expected at IAA 2024.

Root: In addition to a developing pipeline of the new and exciting commercial vehicle customers we.

Finally join.

Joining me on slide nine to go over some updates for our U S operations.

Root: We see several catalysts for <unk>.

Root: Continuing growth in 2020 for one of those is higher.

The challenging financing environment means that for the time being we have got our clarksville as far as we can.

Root: Volume from <unk> and <unk> platforms.

Root: As we are seeing continued expansion and a demand in the segment were also obtained decrements demand and are working with a leading refuse truck OEM with the demo expected at IAA 2024.

On our own balance sheet.

Because of this original growth and a profitability in APAC and the EMEA will be the key drivers.

For our business in 2024 until this third party financing needed to complete the phase one <unk> facility has been secured.

Finally join me on slide nine to go over some updates for our U S operations.

Accordingly.

We are not currently anticipating material production volumes or revenues from our crossword facility. We are also not expecting IRR 45 X credits in 2024.

Root: The challenging financing environment means that for the time being we have guarded clarksville as far as we can.

Root: Our own balance sheet.

Once we are able to secure financing our current estimate is that an additional six to eight months is needed to bring clarksville faced <unk> SLP.

Root: Because of this original growth and profitability in APAC and the EMEA will be the key drivers.

Root: For our business in 2024 until this third party financing needed to complete the phase one <unk> facility has been secured.

With the majority of this time allocated to your equipment installation.

In the interim we are.

Root: Accordingly.

Will all be slowing paybacks in the Opex spend in the U S.

Root: We are not currently anticipating material production volumes or revenues from our crossword facility. We are also not expecting IRA qualify were ex credits in 2024.

This slowdown will allow us to better manage liquidity evaluating financing opportunities and build out our U S operations for substantial success in 2025.

Root: Once we are able to secure financing our current estimate is that an additional six to eight months is needed to bring Clarksville phase one <unk> SLP.

Once we reach SLP, we anticipate generating an IRR credits and at delivering qualified products to commercial vehicle and energy storage a customer in the U S.

Root: With the majority of this.

Root: This time allocated to equipment installation.

The lack of funding in the U S has contributed to our assessment that there is currently a substantial doubt that we can continue as a going concern with our raising additional capital.

Root: In the interim we will all be slowing paybacks in the Opex spend in the U S.

Root: This slowdown will allow us to better manage liquidity evaluating financing opportunities and build out our U S operations for substantial success in 2025.

We are engaging our financing and our customer activities to address this urgency however.

Root: Once we reach SLP, we anticipate generating an IRR credit and delivering qualified products to commercial vehicle and energy storage a customer in the U S.

We remain bullish on the U S and at over 23.

Presents to our business.

The energy storage market continues to be an area out with.

The lack of funding in the U S has contributed to our assessment that there is currently a substantial doubt that we can continue as a going concern with our raising additional capital.

Exponential growth.

There is significant customer interest in our partially owned capacity.

Given the advantages in security.

Battery supply that meets domestic content requirement.

Root: And we are engaging in their financing and our customer activities to address this urgency however.

On the commercial vehicle side.

Oems are increasingly electrifying their vehicle lines.

We remain bullish on the U S and at over 23.

We see demand for our <unk> technology across a wide area of settlements and have numerous projects underway that we anticipate will create a demand for flexible production in 2025.

Root: Presents to our business.

Root: The energy storage market continues to be an area outweighs.

Root: Exponential growth.

Root: And as there is significant customer interest in our partially owned capacity.

So 2023, it was not without challenges.

Root: Given the advantages in security.

It was also full of successes and we are proud of our achievements in the last year. We are looking forward to executing on the many opportunities ahead of us in 2024.

Root: Calgary supply that meets domestic content requirement.

Root: On the commercial vehicle side Oems.

Root: <unk> are increasingly electrifying their vehicle lines.

I will now turn the call over to Craig Webster to discuss financials in more detail.

We see demand for our very new technology across a wide area of settlements and have numerous projects underway that we anticipate will create a demand for our clarksville production in 2025.

Thank you Mr. Liu.

I'll spend the next few minutes discussing our full year and Q4 2023 financial results.

Root: So 2023, it was not without challenges.

Please turn to slide 11, and I will summarize the main line items from our Q4 and full year P&L.

It was also full of successes and we are proud of our achievements in the last year. We are looking forward to executing on the many opportunities ahead of us in 2024.

We recorded revenue of one to $4 6 million in Q4 2023.

Compared to $64 8 million in Q4, 2022% to 61% year over year increase as Mr. <unk> mentioned earlier, a record revenue quarter for the company.

Root: I will now turn the call over to Craig Webster to discuss financials in more detail.

Craig Webster: Thank you Mr. Liu.

I'll spend the next few minutes discussing our full year and Q4 2023 financial results.

On a full year basis, despite facing several challenges we achieved revenue of $306 6 million up 50% from $204 5 million in the prior 12 month period.

Craig Webster: Please turn to slide 11, and I will summarize the main line items from our Q4 and full year P&L.

Craig Webster: We recorded revenue of one or two new $4 6 million in Q4 2023.

We posted gross profit of $23 million in Q4, 2023 compared to gross profit of $2 2 million in Q4 2022.

Craig Webster: Compared to $64 8 million in Q4, 2022% to 61% year over year increase as Mr. Liu mentioned earlier, a record revenue quarter for the company.

<unk> thousand 934% improvement.

On a full year basis, our gross profit was $57 2 million compared to a gross profit of $9 1 million for the prior year, a 531% improvement.

On a full year basis, despite facing several challenges we achieved revenue of $306 6 million.

Our gross margin for full year 2023 was 18, 7%, whereas in the prior year. It was four 4% a 14 three percentage points improvement.

Craig Webster: Up 50% from $204 5 million in the prior 12 month period.

Craig Webster: We posted gross profit of $23 million in Q4, 2023 compared to gross profit of $2 2 million in Q4 2022.

Operating expenses were $46 million in Q4, 2023 compared to $77 3 million in Q4 2022.

Craig Webster: 934% improvement.

Craig Webster: On a full year basis, our gross profit was $57 2 million compared to a gross profit of $9 1 million for the prior year, a 531% improvement.

The largest contributor to the increase in operating expenses with the increased head count for both our Colorado and Tennessee facilities.

We build out our U S operation.

Full year 2023, operating expenses were $165 9 million compared to $170 7 million in the prior year, a 3% decrease.

Craig Webster: Our gross margin for full year 2023 was 18, 7%, whereas in the prior year. It was four 4% a 14 three percentage points improvement.

GAAP net loss was $24 6 million in Q4 2023 compared to net loss of $33 7 million in Q4 2022.

Craig Webster: Operating expenses were $46 million in Q4, 2023 compared to $37 3 million in Q4 2022.

Craig Webster: The largest contributor to the increase in operating expenses with the increased head count for both our Colorado and Tennessee facilities as we build out our U S operation.

GAAP net loss for full year, 2023 was $106 4 million compared to a net loss of $158 2 million in the full year 2022.

Craig Webster: Full year 2023, operating expenses were $165 9 million compared to $170 7 million in the prior year.

These results show that as we scale, our business and industrialize our technologies, we are narrowing our losses.

We believe a more appropriate representation of our financial performance, especially as it relates to cash operating expenses and operating loss is as illustrated in slide 12.

Craig Webster: 3% decrease.

GAAP net loss was $24 6 million in Q4 2023 compared to a net loss of $33 7 million in Q4 2022.

After adjusting for non cash settled share based compensation expense and our cost of sales adjusted gross profit was $24 6 million in Q4 2023 compared to adjusted gross profit of $4 2 million in Q4 2022. This translates into an adjusted gross margin.

Craig Webster: GAAP net loss for full year, 2023 was $106 4 million compared to a net loss of $158 2 million in the full year 2022.

Craig Webster: These results show that as we scale, our business and industrialize our technologies, we are narrowing our losses.

23, 5% in Q4 2023 compared to six 4% in Q4 2022.

Craig Webster: We believe a more appropriate representation of our financial performance, especially as it relates to cash operating expenses and operating loss is as illustrated in slide 12.

17, one percentage point improvement.

We're pleased to see another quarter of gross margin improvement as our business benefits from higher sales volumes increased utilization and <unk>.

Craig Webster: After adjusting for non cash settled share based compensation expense and our cost of sales.

Craig Webster: Gross profit was $24 6 million in Q4 2023 compared to adjusted gross profit of $4 2 million in Q4 2022.

Better raw materials pricing on these higher volumes.

When making the same adjustments with full year 2023, our adjusted gross profit was $63 3 million compared to an adjusted gross profit.

Craig Webster: This translates into an adjusted gross margin of 23, 5% in Q4 2023 compared to six 4% in Q4 2022, a 17, one percentage point improvement.

$16 8 million in full year 2022.

This translates into an adjusted gross margin of 27% in full year 2023, compared to eight 2% in full year 2022, a 12 five percentage points improvement.

Craig Webster: We're pleased to see another quarter of gross margin improvement as our business benefits from higher sales volumes increased utilization and better raw materials pricing on these higher volumes.

After adjusting for noncash SBC expense in SG&A and R&D, our adjusted operating expense in Q4, 2023 was $34 3 million compared to $21 4 million in Q4 2022.

Craig Webster: We're making the same adjustments for full year 2023, our adjusted gross profit was $63 3 million compared to an adjusted gross profit of $16 8 million in full year 2022.

We're making the same adjustment for full year 2023, our adjusted operating expense was $107 1 million compared to $96 5 million for full year 2022.

Craig Webster: This translates into an adjusted gross margin of 27% in full year 2023.

At eight 2% in full year 2022, a 12 five percentage points improvement.

This was an 11% year over year increase being a much slower rate of increase than our topline growth of 50%.

Craig Webster: After adjusting for noncash SBC expense in SG&A and R&D, our adjusted operating expense in Q4, 2023 was $34 3 million compared to $21 4 million in Q4 2022.

After making those noncash spca claims adjustments and accounting for changes in fair value of our warrant liability.

Adjusted net loss was $11 4 million in Q4, 2023 compared to $15 9 million in Q4 2022.

Craig Webster: We're making the same adjustment for full year 2023, our adjusted operating expense was $107 1 million compared to $96 5 million for full year 2022.

On a full year basis.

Adjusted net loss was $41 6 million in full year 2023, compared to $77 3 million in full year 2022.

Craig Webster: This was an 11% year over year increase being a much slower rate of increase than our topline growth of 50%.

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.

Craig Webster: Okay.

After making those noncash SBC expense adjustments and accounting for changes in fair value of our warrant liability.

Slide 13 shows the geographic breakdown of our revenue for the 12 months ended December 31, 2023 compared to the prior year period.

Craig Webster: Adjusted net loss was 11 4 million in Q4 2023 compared to $15 9 million in Q4 2022.

As you can see our three largest markets, where Asia Pacific, China, and EMEA, growing, 19%, 18% and 434% respectively year over year.

Craig Webster: A full year basis, adjusted net loss was $41 6 million in full year 2023, compared to $77 3 million in full year 2022.

Revenue in our U S region for full year, 2023 posted a slight decline of 14% compared to full year 2022 with revenue losses in our <unk> division being the biggest disappointment.

Craig Webster: 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.

Craig Webster: Slide 13 shows the geographic breakdown of our revenue for the 12 months ended December 31, 2023 compared to the prior year period.

However, as we mentioned.

So near term financing challenges to address in the U S. We expect our U S business to make meaningful contributions in the future as we are well positioned to capitalize on the domestic content opportunity in the U S. Once our Clarksville facility reaches SLP.

Craig Webster: As you can see our three largest markets, where Asia Pacific, China, and India, growing, 19%, 18% and 434% respectively year over year.

Craig Webster: Revenue in our U S region for full year, 2023 posted a slight decline of 14% compared to full year 2022 with revenue losses in our <unk> division being the biggest disappointment.

I will now turn it back over to Mr. <unk> to provide some visibility into the outlook for the coming year.

Okay.

Thanks, Chris.

Please turn to slide 15.

We expect Q1 2020 for revenue to increase 40% to 60% year over year.

Craig Webster: However, as we mentioned despite some near term financing challenges to address in the U S. We expect our U S business to make meaningful contributions in the future as we are well positioned to capitalize on the domestic content opportunity in the U S. Once our Clarksville facility reaches SLP.

This post Q1 revenue guidance in the range of $65 million to $75 million.

We also aim to maintain our gross margin target of between 20% to 25%.

None: I will now turn it back over to Mr. <unk> to provide some visibility into the outlook for the coming year.

From our Asia Pacific operations, we expect all three who faces to deliver quantified products to customers throughout 2024.

Chris: Thanks, Chris.

Please turn to slide 15.

We will also be targeting and increasing utilization continuing progress on the R&D for new products and are targeting original profitability.

None: We expect Q1 2020 for revenue to increase 40% to 60% year over year.

None: This post Q1 revenue guidance in the range of $65 million to $75 million.

In 2024.

We also expect our EMEA operations to continue meaningful revenue growth with a new customer wins for specialty commercial vehicles, we're talking original breakeven for the year.

None: We also aim to maintain our gross margin target of between 20% to 25%.

None: From our Asia Pacific operations, we expect all three <unk> faces to deliver quantify products to customers throughout 2024.

Turning to U S. We plan a reduction in <unk> spending for the year until we can secure funding for cross sale. Once the facility is online we will be tucked in rapidly grows and aiming to secure capacity.

None: We will also be tucked in increasing utilization continuing progress on the R&D for new products and the top 10 original profitability.

None: In 2024, we also expect our EMEA operations to continue meaningful revenue growth with a new customer wins for specialty commercial vehicles, we're talking original breakeven for the year.

Amendments from both energy storage and our commercial vehicle customers to achieve high utilization levels.

For 2020 for the company's core forecast is going to be maintaining revenue growth and our margin profile as catalyst to improve our liquidity and providing us with relative breakeven.

None: Turning to U S. We plan a reduction in Opex and the Capex spending for the year until we can secure funding for cross sale. Once the facility is online we will be tucked in rapidly grows.

With that I would now like to open the call up to your questions. Operator, please provide instructions for the Q&A session.

None: And aiming to secure capacity commitments from both energy storage and our commercial vehicle customers to achieve high utilization levels.

Thank you Sir.

As a reminder to ask a question you will need to press star one one on your telephone.

None: For 2020 for the company's core forecast is going to be maintained in revenue growth and our margin profile.

To remove yourself from the queue you May press star one again.

Please limit yourself to one question and one follow up.

None: As Carlos to improve our liquidity and providing us with a relative breakeven.

Please standby, while we compile the Q&A roster.

Again that star one one on your Touchtone telephone to ask a question.

None: With that I would now like to open the call up to your questions.

Greater: Greater please provide instructions for the Q&A session.

Our first question comes from the line of Colin Rusch of Oppenheimer. Please go ahead Colin.

None: Thank you Sir as a reminder.

None: Okay.

Thanks, So much you guys.

None: Telephone.

Can you talk a little bit about the overall quantum of capital that you're going to need to secure ticket Clarksville back on track and then also how we should.

Greater: To remove yourself from the queue you May press Star one one again.

Greater: Please limit yourself to one question and one follow up.

You'd think about the moderation.

Greater: Please standby, while we compile the Q&A roster.

And Opex.

In the U S and how that impacts the overall company Opex run rate.

Again, that's star one one on your Touchtone telephone to ask a question.

Okay.

It was long term is to take that one yes.

Our first question comes from the line of Colin Rusch of Oppenheimer. Please go ahead Colin.

Correct.

And I Couldnt hope you're well.

So as we indicated last time, we've got about half way through clubs.

Colin William Rusch: Thanks, So much you guys.

Club alone Capex.

Colin William Rusch: Can you talk a little bit about the overall quantum of capital that youre going to need to secure ticket Clarksville back on track and then also how we should think about the moderation in.

So to get it done.

About $150 million.

That includes some aging AP.

So the majority of what's left to spend relates to equipment and installation.

Colin William Rusch: And Opex.

Colin William Rusch: In the U S and how that impacts the overall company Opex run rate.

And to do that we need to raise money as we've always said we've got this as far as we could on balance sheet. So.

None: It was long term is to take that one.

Yes.

None: Great.

And I call and hope you're well.

We've been working for quite a period now and you're probably sick of hearing us talk about it on the financing.

So as we indicated last time, we've got about half way through clubs.

Club Salon Capex.

And it wasn't done at the end of the year, we're still making progress on that.

None: So to get it done.

None: About $150 million.

No guarantees that it's done we've been spending a lot of time with with one lender in particular.

None: That includes some aging AP.

None: So the majority of what's left to spend.

The.

None: Relates to equipment and installation.

Estimated timing to get them.

None: And to do that we need to raise money as we've always said, we got this as far as we could on balance sheet. So.

So the <unk> would be.

Six to eight months from when we close that financing.

And as I just mentioned the majority of that time is to do installation.

None: Working for quite a period now and you're probably sick of hearing us talk about it on the financing.

We'd already started some installation during Q4.

None: And it wasn't done at the end of the year, we're still making progress on that.

Opex wise.

Currently when managing that because we've not closed the financing so.

No guarantees that he's done we've been spending a lot of time with with one lender in particular.

Really as we mentioned on the call is regional.

The.

Regional.

None: Estimated timing to get cloud.

Focus on what we do which is.

China has got really good and decent growth rate, it's profitable it's self financing.

None: <unk> would be.

None: Six to eight months from when we close that financing.

None: And as I just mentioned the majority of that time is to do installation.

Got access its own Capex and Opex credit line.

Europe as you just saw had a really good year.

None: We'd already started some installation during Q4.

None:

Start of like electrification for a lot of its customers.

None: Opex wise currently with managing that because we've not closed the financing so.

We'd expect Europe to have another really solid year in.

None: Really as we mentioned on the call is regional.

In 'twenty for the.

The operating base in Europe is much smaller because it's just a module line.

None: Regional.

Focus on what we do which is.

None: China has got really good and decent growth rate, it's profitable itself financing.

Doesn't need any financing.

Got it really good customer base does that answer your question.

None: Access its own Capex and Opex credit line.

Yes, It does and then in terms of the customer growth.

None: Europe as you just saw had a really good year.

And Europe, and China can you talk a little bit about.

None: The start of like electrification for a lot of its customers.

You talked a little bit about the revenue for the first quarter, but can you talk about the order activity.

We'd expect Europe to have another really solid year in.

Now that <unk>.

Trending versus where you're at in terms of the backlog and how much harder to a whole bunch of them.

None: In 2000 and for the.

None: The operating base in Europe is much smaller because it's just a module line.

Okay.

The backlog impacts we've had come from energy storage.

None: Doesn't need any financing.

So we've reached a mutual resolution with the customer.

None: Got a really good customer base does that answer your question.

To reduce the volume.

None: Yes, It does and then in terms of the customer growth.

On a contract that impacted backlog.

So backlog now is predominantly commercial vehicles.

None: And Europe, and China can you talk a little bit about.

None: You talked a little bit about the revenue for the first quarter, but can you talk about the the order activity.

You know our business pretty well, so Q4 is always seasonally the strongest quarter.

None: How that's trending versus where you're at in terms of the backlog and how much harder to a whole bunch of them.

Particularly in China, where they differed a lot of their orders until the end of the year.

None: Okay.

None: The backlog impact we've had come from energy storage.

Q1, still going to be a really solid quarter for resin as you know.

So we've reached a mutual resolution with the customer to reduce the volume.

I see.

Slowest won because of <unk>.

So Chinese new year, so we lose a lot of revenue.

None: On a contract that impacted backlog.

And Timna is be February this year.

None: The backlog now is predominantly commercial vehicle.

The.

Encouraging Paul on your is the number of platforms that we're on so its ebooks.

None: In our business pretty well, so Q4 is always seasonally the strongest quarter.

Light commercial vehicles and its commercial truck specialty.

None: Particularly in China, where they differed a lot of their orders until the end of the year.

So we would expect.

None:

None: Q1, still going to be a really solid quarter for resin as you know it's always the.

Europe to have.

It's a big contribution to overall revenue growth in the year, but.

None: Slowest one because.

Just looking at where we're out on the financing side, which is the key focus we can give you a much more informed decision.

None: Impacts of Chinese new year, So we lose a lot of revenue in <unk>.

None: <unk> be February this year.

On the year and what things look like in a couple of months' time.

None:

None: The.

Okay. Thanks, so much guys I'll hop back in queue and I'll follow up offline. Thanks.

Encouraging Paul on your is the number of platforms that we're on so its E books.

Okay.

Thank you again to ask a question you May press star one on your telephone.

None: Light commercial vehicles and its commercial truck specialty.

None:

None: So we would expect.

None: Sure.

Please standby for our next question.

None: <unk>.

None:

None: It's a big contribution to overall revenue growth in the year, but.

Our next question comes from the line of.

None: Just looking at where we're out on the financing side, which is the key focus we can give you a much more informed decision.

Sean Milligan of Janney Montgomery Scott Your question please Sean.

On the year and what things look like in a couple of months' time.

Hey, Greg.

None: Okay. Thanks, so much guys I'll hop back in the queue and alcohol on top line.

Can you walk us through expectations for 2024.

Okay.

None: Thank you again to ask a question you May press star one on your telephone.

Kind of like operating cash flow.

You highlight that you're trying to.

Brian Asia and Europe.

Kind of breakeven or above breakeven just kind of trying to get the expectations on op cash flow for this year and then just updated capex figures, if youre not spending anything for Capex in the U S.

None: Please stand by for our next question.

None: Our next question comes from the line of Sean Milligan of Janney Montgomery Scott Your question. Please Sean.

We're spending on that 48 empower line in China, and that's still fully funded via the facility correct.

Hey, Greg.

Can you walk us through expectations for 2024.

So.

Any capex spend in the U S is going to be completely contingent on raising financing to do that so.

Sean Michael Milligan: Kind of like operating cash flow.

Sean Michael Milligan: You highlight that you're trying to.

Brian Asia and Europe.

If we are successful to close then we would expect to spend around $150 million.

Sean Michael Milligan: Kind of breakeven or above breakeven just kind of trying to get the expectations on op cash flow for this year and then just updated capex figures, if youre not spending anything for Capex in the U S.

In the U S. That's clubs with phase one a.

Debt funded.

Capex elsewhere would be very very minimal.

Sean Michael Milligan: We're spending on that 48 empower line in China, and that's still fully funded via the facility correct yes.

China, if we need to do the phase 3.2 expansion.

Sean Michael Milligan: So.

And that's a smaller amounts of dollars like we estimate around $30 million to do that.

Sean Michael Milligan: Any capex spend in the U S is going to be completely contingent on raising financing to do that so.

We would do it provided we've got financing in place.

Sean Michael Milligan: If we are successful to close than we'd expect to spend around $150 million.

And as you know that we've got the Capex.

It's a line we have not used yet.

In China from the local banks.

Sean Michael Milligan: In the U S. That's clubs, who face when a debt funded.

So the biggest project.

Sean Michael Milligan: Capex elsewhere would be very very minimal.

It's highly contingent on that financing is doing well.

Sean Michael Milligan: China, if we need to do the phase three two expansion.

<unk>.

Operating operating wise.

And that's a smaller amounts of dollars like we estimate around $30 million to do that.

We're self funded.

In China.

Self funded.

Sean Michael Milligan: We would do a provided we've got financing in place and as you know that we've got the Capex.

Germany.

Germany has got a very strong position with its customers.

Sean Michael Milligan: It's a line we have not used yet.

In terms of backlog, increasing sales and it's not a.

Sean Michael Milligan: In China from the local banks.

Sean Michael Milligan: So the biggest project.

The expense of operating base to run.

Sean Michael Milligan: It's highly contingent on that financing is doing two phase <unk>.

We've got to be quite careful.

In the U S and.

Sean Michael Milligan: Operating operating wise.

Depending on where we get to in terms of that total financing solution for the U S. We're going to have to be quite prudent in how we manage U S operations going forward.

Sean Michael Milligan: We're self funded.

Sean Michael Milligan: In China.

Sean Michael Milligan: Self funded.

Sean Michael Milligan: Germany.

Sean Michael Milligan: Germany has got a very strong position with its customers.

Okay.

So like right now as it stands that phase three two in China is that going forward or not.

Sean Michael Milligan: In terms of backlog, increasing sales and it's got a.

Currently we will put three two on hold we still got a pretty a decent yes plenty of decent growth opportunity in China without that.

Sean Michael Milligan: So are they expensive operating base to run.

None: We've got to be quite careful.

None: In the U S and.

None: Depending on where we get to in terms of that.

None: Yeah.

None: Okay.

Okay. Thank you.

None: Prudent.

Operations going forward.

Thank you.

Our next question.

None: Okay.

Come from the line of Derek Soderberg of Cantor Fitzgerald. Your line is open Derrick.

None: So like right now as it stands that phase three two in China is that going forward or not.

None: Currently we will put three two on hold that we still got plenty of decent yes plenty of decent growth opportunity in China without that.

Yeah, Hey, guys. Thanks for taking the questions.

On gross margin guidance, 20% to 25% a really good number there I'm curious what's driving that can you talk a bit about who's y'all utilization today, and kind of where that's going to move throughout.

Throughout the year and maybe if you could just kind of frame.

None: Okay. Thank you.

Gross margin Directionally from from there, how we should sort of move throughout the year that'd be helpful. Thanks.

Thank you.

None: Our next question.

None: Comes from the line of Derek Soderberg of Cantor Fitzgerald. Your line is open Derrick.

As long as you want to take that one.

Yeah.

Go ahead your counters questions. Okay. Okay sure okay. Thanks.

Yeah, Hey, guys. Thanks for taking the questions.

Derek Soderberg: On gross margin guidance, 20%, 25%, a really good number there I'm curious what's driving that can you talk a bit about who's y'all utilization today, and kind of where that's going to move.

Derek you're right.

Really.

If you're a really solid year for us.

In terms of gross margin business fundamentals.

We know the news on.

Derek Soderberg: Throughout the year and maybe if you could just kind of frame.

Liquidity in U S is not is not great, but we feel we've got solutions for that and.

Derek Soderberg: Gross margin Directionally from from there, how we should sort of move throughout the year that'd be helpful. Thanks.

The business fundamentals lend into it right. So we we've just grown revenue 50%.

None: As long as you want to take that one.

None: Yeah.

None: Go ahead your counters questions. Okay. Okay sure okay. Thanks.

We really expanded the gross margin line and we really managed our opex and remember the.

None: Derek you're right.

We're a global business. So you know compare opex to other people.

None: Really.

Derek Soderberg: If you have a really solid year for us.

One of the launches of the new technology battery business right as a global operation with manage that pretty well.

In terms of gross margin business fundamentals.

Derek Soderberg: We know the news on.

Gross margin expansion.

Derek Soderberg: Liquidity in the U S is not is not great, but we feel we've got solutions for that and.

Really came down to higher sales always helps so higher sales.

The pricing on our raw material yields being really good across the three phases phase one two and three.

Derek Soderberg: The business fundamentals lend into it right. So we were just growing revenue 50%.

Derek Soderberg: We really expanded the gross margin line and we really managed our opex and remember.

And then raw material prices have helped as well that's been the real contribution there.

As we look out this year I think we're going to see good utilization on online phase one two and three.

We're a global business. So you know compare opex towards the people that are trying to launch a sort of new technology battery business right as a global operation, we've managed that pretty well.

Phase III as you know is 53.5 because.

They're going to be delivering to all regions, China Asia Pacific Europe.

Derek Soderberg: Gross margin expansion.

Derek Soderberg: Really came down to higher sales always helps so higher sales.

And the U S.

So we would expect this year to be able to hold.

Derek Soderberg: Better pricing on our raw material.

Gross margin in that 20% to 25% and then it will just come down to if we're really accelerating clocks will again, then there will be some push up on opex, but if we if we don't do that.

Yields being really good across the three phases phase one two and three and then raw material prices have helped as well that's been the real contribution there.

Derek Soderberg: As we look out this year I think we're going to see good utilization on online phase one two and three.

We will be managing opex.

Not far from where we're at currently at.

Derek Soderberg: Phase III as you know is 53.5 because.

Yeah.

Got it that's helpful. And then just related to sort of a previous question I just wanted to clarify some things you know with the Opex management here is there sort of a revenue run rate you would need to get to to reach profitability could you share that with US and then just to clarify it sounds like.

Derek Soderberg: They're going to be delivering to all regions, China Asia Pacific Europe, and the U S.

So we would expect this year to be able to hold <unk>.

Both margin and that 20% to 25% and then.

Derek Soderberg: It will just come down to if we're really accelerating clocks will again, then there will be some push up on opex, but if we if we don't do that.

APAC is going to be profitable this year, well you know what.

What about EMEA.

Derek Soderberg: We will be managing opex.

The broader business and if you can kind of relate that back to the revenue run rate you would need to get to.

Derek Soderberg: Not far from where we're at currently at.

For profitability would be helpful. Thanks sure.

Derek Soderberg: Yeah.

None: Got it that's helpful. And then just related to sort of a previous question I just wanted to clarify some things you know what the Opex management here is there sort of a revenue run rate you would need to get to to reach profitability could you share that with US and then just to clarify it sounds like.

So.

APAC had consistent profitability the whole year 'twenty three.

We'd expect that to continue into 'twenty four.

EMEA.

If it can deliver the volumes that we're expecting so is a decent growth year.

Would be very close to breakeven.

None: APAC is going to be profitable this year.

The <unk>.

None: What about EMEA.

Q4 numbers.

None: The broader business and if you can kind of relate that back to you know the revenue run rate you would need to get to.

Illustrated with what it needs to take to get close to breakeven so.

Probably when we're at a sort of 150 run rate revenue per quarter, we're going to be very close to breakeven.

None: For profitability that would be helpful. Thanks sure.

So in APAC at consistent profitability the whole year 'twenty three.

None: We'd expect that to continue into 'twenty four.

Got it I appreciate it thanks guys.

None: EMEA.

If it can deliver the volumes that we're expecting so a decent growth year would be very close to breakeven.

Thank you.

Now I'd like to turn the conference back to Yang for closing remarks, Sir.

Yeah.

None: <unk>.

None: The Q.

None: Q4 numbers.

Okay. Thank you all for joining us today look forward updating you our progress again soon for the first quarter of 2024 allow us additional operational updates and guidance for the rest of the year. Thank you.

None: Illustrative of what it needs to take to get close to breakeven so.

None: Probably when we're at a sort of.

None: <unk> 50 run rate revenue per quarter, we're going to be very close to breakeven.

None: Got it I appreciate it thanks guys.

This concludes today's conference call. Thank you for participating you may now disconnect.

Thank you.

None: Now I'd like to turn the conference back to Yang for closing remarks, Sir.

None: Yeah.

Yang: Okay. Thank you all for joining us today look forward updating you our progress again soon for the first quarter of 2024 allow us additional operational updates and guidance for the rest of the year. Thank you.

None: This concludes today's conference call. Thank you for participating you may now disconnect.

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None: Thank you for standing by and welcome to Microburst fourth quarter, 2023, and four year conference call.

None: At this time all participants are in a listen only mode.

Speaker Change: The conference is being recorded after the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to micro vast Investor Relations. Please go ahead.

Speaker Change: Yes.

Speaker Change: Thank you operator, and thank you everyone for joining us today.

With me on today's call are Mr. Jang Woo founder Chairman and CEO and Mr. Craig Webster Chief Financial Officer.

Speaker Change: Mr Root will start off with a high level overview of the quarter before providing some operational updates Mr. Webster will then discuss our financials in more detail before handing it back to Mr. <unk> to address our first quarter 'twenty 'twenty four outlook and opening the call up to questions.

Speaker Change: Ahead of this call Microsoft issued its fourth quarter and full year 2023 earnings press release, which can be found on the Investor Relations section of the company's website IR Dot microburst Dot Com. In addition, we have posted a slide presentation to the website to accompany management's prepared remarks.

Speaker Change: As a reminder, please note that statements made in this call are forward looking and based on current expectations and assumptions.

It should not be relied upon as representative abuse for subsequent dates and Reed undertake no obligation to revise with the result.

Okay.

Speaker Change: Right.

Speaker Change: Actual results may differ materially from expectations due to a variety of risks and uncertainties for more information on material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC.

After the conclusion of this call a webcast replay will be available on the Investor Relations section of Microburst website, and now I will turn the call over to Mr. Root for opening remarks.

Root: Thank you and thank you all for joining us today.

Mr. Root: Please turn to slide three as a cover a few highlights from our full year 2023 financial performance.

Root: Before turning to our key achievements in Q4.

Root: I'm pleased to say that we booked a record revenue of.

Root: $306 6 million for the full year 2023.

Root: This was driven primarily by substantial year over year revenue increases in our EMEA business.

Root: Which grew.

Revenue of 434% compared to 2022.

Root: We also saw double digit percentage growth in both APAC and China.

The overall business saw a top line increase of 50% year over year and we delivered.

Root: This strong revenue performance at a high gross margin.

Root: Which increased to 90% from a full percent in the prior year.

Root: I'm also very pleased with the results from Marvell Who's always 3.1 expansion that was completed during the year.

Root: Starting in the second half of 2023, we weren't delivering quantify products to our diverse customer base from our latest the fully automated production line.

This demonstrates that a we can successfully industrialized our technology at scale.

Please join me on slide five to go over our successes in the final quarter of the year.

Root: Along with some challenges that are we also faced.

Root: We saw our highest revenue quarter.

Root: $104 6 million Junkins, 61% year over year, and we achieved an adjusted gross margin of 23, 5%.

Root: We saw major successes in our commercial vehicle business.

Root: Expanding our relationships with Oems or white, we are working with Neil manufacturers' on testing our products for additional contracts in 2025.

Root: And we have begun to gain meaningful traction in specialized and differentiated vehicle segments.

However.

Root: The year also broad challenges, we saw a challenging financing environment.

And reduced energy storage contract through a mutual read his motion with a customer and an overall negative market sentiment.

Root: In both the sector and for Ravi gross companies like ours.

Turning to slide six we have made some exciting business development in our commercial vehicle business.

Root: When received many new orders and are delivered to customer a variety of our products.

Root: Knowing the strength of our technology portfolio.

Root: This included leading Oems such as ever Star NV L. G M G and launching new energy.

Root: Please join me on slide seven to go over some updates, Iran. Our APAC operations.

Root: As I mentioned in the opening.

Root: Our <unk> phase 3.1 automated line has been successfully brought online is producing quantified 53 points and powerful.

And.

Root: Okay.

Root: Significant additional payback associated with phase III point of one going into 2024.

Root: The APAC business generated revenue of 2000 19 million in full year, two sentiment suite, increasing 18% year over year.

Root: We anticipate that the APAC business well generate original profitability as operations are now mature self funding and achieving sustainable gross margins.

Root: We also expect a further revenue expansion year over year.

Root: Our expectations are driving by two major components.

Root: First is a market in China.

Root: Where are we bringing in stable revenue from our established base of E bus Oems, but.

Root: But we are also seeing promising ex finishing of the 20 Ts in the electrified mining and the earthmoving segment.

Root: Where our high power products offer performance advantages.

Root: The second major contributors is Indian market, whereas the EBA segments is growing rapidly and is supported by government incentives with some of our major partners expected to benefit.

Root: Turning to slide eight.

Root: We will go over some updates around our EMEA operations.

Root: We saw electrifying gross in 2023.

Root: With the original revenues up more than 434% year over year, we have a localized production of our VBA modules.

And anticipated customer demand won't lead to increasing volumes. We also expect additional revenue growth in the region of 2024.

Root: Heaven narrowed our losses in 2023, we also have our sights sets on.

Root: Original breakeven for the coming year.

Root: In addition to a developing pipeline of the new and exciting commercial vehicle customers. We see several catalysts for continuing growth in 2020 for one of those is higher ex Pat good volume from E bus and L. C V platforms.

Root: As we are seeing continue our expansion and a demand in the segment were also seen segments demand and are working on ways that immediately.

Root: Refuse truck OEM with a demo expected at IAA a 2024.

Root: Finally join me on slide nine to go over some updates for our U S operations.

Root: The challenging financing environment means that for the time being we have got a plus fell as far as we can.

Root: On our own balance sheet.

Root: Because of this original growth and a profitability in APAC and EMEA will be the key drivers.

Root: For our business in 2024 until this third party financing needed to complete the phase one a facility has been secured.

Root: Accordingly.

Root: We are not currently anticipating material production volumes or revenues from our Kosovo facility. We are also not expecting IRA 45 X credits in 2024.

Root: Once we are able to secure financing our current estimate is that an additional six to eight months is needed to bring Clarksville phase one a two S. L P.

Root: With a majority of less time allocated to equipment installation.

Root: In the interim we will all be slowing paybacks in the Opex spend in the U S.

Root: This slowdown will allow us to better manage liquidity evaluating financing opportunities and the build out of our U S operations for substantial success in 2025.

Root: Once we reach S. O P. We anticipate generating an IRR credits and at delivering qualified products to commercial vehicle and energy storage a customer in the U S.

Root: The lack of funding in the U S has contributed to our assessment that there is currently a substantial doubt that we can continue as a going concern without raising additional capital.

We are engaging their financing and a customer activities to address this urgency however.

Root: We remain bullish on the U S and in over 23.

Presents to our business.

Root: The energy storage market continues to be an area outweighs.

Root: Exponential growth.

Root: And then there is significant customer interest in our croswell capacity.

Root: Given the advantages in security.

Root: Battery supply that meets domestic content requirement.

Root: On the commercial vehicle side.

Root: Oems are increasingly electrifying their vehicle lines your P S.

Root: We see demand for our various technology across a wide area of settlements and have numerous projects underway that we anticipate will create a demand for clarksville production in 2025.

Root: So 2023, it was not without challenges.

Root: There was also full of successes and we are proud of our achievements in the last year. We are looking forward to executing on the many opportunities ahead of us in 2024.

Root: I will now turn the call over to Craig Webster to discuss financials in more detail.

Craig Webster: Thank you Mr. Lu.

Craig Webster: I'll spend the next few minutes discussing our full year and Q4 2023 financial results.

Please turn to slide 11, and I will summarize the main line items from our Q4 and full year P&L.

Craig Webster: We recorded revenue of 100, and a $4 6 million in Q4 2023.

On page $64 8 million in Q4, 2022% to 61% year over year increase with Mr. Lew mentioned earlier, a record revenue quarter for the company.

Craig Webster: On a full year basis, despite facing several challenges we achieved revenue of $306 6 million up 50% from $204 5 million in the prior 12 month period.

We posted gross profit of $23 million in Q4, 2023 compared to gross profit of $2 2 million in Q4 2022 eight.

Craig Webster: A 934% improvement.

Craig Webster: On a full year basis, our gross profit was $57 2 million.

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