Q1 2024 Microvast Holdings Inc Earnings Call
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Operator: Thank you, Operator, and thank you, everyone, for joining us today. Thank you, Operator, and thank you everyone for joining us today.
Thank you operator, and thank you everyone for joining us today.
Operator: Great.
Operator: Thank you operator.
Operator: And thank you everyone for joining us today.
Unknown Executive: With me on today's call are Mr. Yang Wu, Founder, Chairman, and CEO, and Ms. Nancy Smith, Interim CFO. Mr. Wu will start off with a high-level overview of the quarter before providing some operational updates. Ms. Smith will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our second quarter 2024 outlook. Ahead of this call, Microvast issued its first quarter earnings press release, which can be found on the investor relations section of the company's website, ir.microvast.com.
Operator: With me on today's call are Mr. Yang.
Unknown Executive: Founder Chairman and CEO.
Nancy Smith: Nancy Smith interim CFO.
Unknown Executive: Mr will start off at a high level overview of the quarter before providing some operational updates mismatch will then discuss our financials in more detail before handing it back to Mr. Boon to wrap up with our second quarter 2020 for outlook.
Unknown Executive: Ahead of this call Microburst issued its first quarter earnings press release, which can be found on the Investor Relations section of the company's website IR Dot microburst Dot com.
Unknown Executive: In addition, we have posted a slide presentation of the company website to go along with management's prepared remarks.
Unknown Executive: In addition, we have posted a slide presentation of the company website to go along with management's prepared remarks. As a reminder, please note that statements made during this call are forward-looking and based on current expectations and assumptions. They should not be relied upon as representative of views for subsequent dates, 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. However, actual results may differ materially from expectations due to a variety of risks and uncertainties.
Unknown Executive: As a reminder, please note that statements made during this call are forward looking and based on current expectations and assumptions they should not be relied upon as representative abused 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.
Unknown Executive: Yes.
Unknown Executive: 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.
Unknown Executive: 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.
Unknown Executive: These non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release.
Unknown Executive: After the conclusion of this call a webcast replay will be available on the Investor Relations section of the micro best website.
Unknown Executive: For more information on material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. 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. After the conclusion of this call, a webcast replay will be available in the Investor Relations section of the Microvast website. Now, I will turn the call over to Mr. Wu for opening remarks.
Speaker Change: Now I will turn the call over to Mr. <unk> for opening remarks.
Wu: Thank you.
Yang Wu: And thank you, everyone, for joining today's call. Please turn to slide three as I cover a few highlights from the first quarter. The business posted record first quarter revenue with 73% growth year over year in Q1 2024. Delivery revenue of $81.4 million. We achieved this growth while maintaining a growth margin of 21.2%, a 10.9% point improvement year over year. This incredible growth comes largely from sales increases in our IPAC and EMEA business, year over year. We saw triple-digit percentage growth in both regions. 640% and 184% for APAC and EMEA, respectively. Please join me on slide five.
Wu: And thank you everyone for joining today's call.
Yang Wu: Please turn to slide three I think cover a few highlights from the first quarter the business posted record first quarter revenue with 73% growth year over year in Q1 2024.
Yang Wu: Delivering revenue of 81 4 million.
Yang Wu: We achieved this growth while maintaining a gross margin of 21.2%.
Yang Wu: At 10, 9%.
Yang Wu: Point of improvement year over year.
Yang Wu: This incredible growth comes largely from sales increases in our APAC and EMEA businesses.
Yang Wu: Year over year, we saw triple digit percentage growth in both regions.
Yang Wu: 640% and 184% for APAC and EMEA, respectively.
Yang Wu: Please join me on slide five.
Yang Wu: The company was successfully expanding its commercial vehicle footprint with additional customers and a project in America and Europe alike. We have begun to tap into the Canadian market and are working with an American LCV OEM for a ramp-up expected in the second quarter. We close this first quarter with a backlog of 348.3 million and continue to strive for operational efficiency. The company posted a significant improvement to adjust the growth margin at 22.6% and a 9.1 percentage point increase year over year.
Yang Wu: The company was successfully in expanding its commercial vehicle footprint with additional customers and projects in America and Europe.
Yang Wu: Europe alike.
Yang Wu: We have begun to tap into the Canadian market and now working ways American L. C V OEM full ramp up expected in the second quarter.
Yang Wu: We closed the first quarter with a backlog of three.
Yang Wu: $348 3 million and continue to strive for operational efficiency.
Yang Wu: The company posted a significant improvement to adjusted gross margin added 22, 6%.
Yang Wu: 9.1 percentage point increase year over year.
Yang Wu: The company posted yet another banner quarter, and we expect continued growth and successes. But this also came with challenges. In addition to the current market sentiment facing the cleantech industry, we continue to navigate the U.S. financing hurdles. Turning to slide six.
Yang Wu: The company posted yet another banner quarter.
Yang Wu: And we expect that continued growth in our successes.
Yang Wu: So this also came way challenges.
Yang Wu: In addition to the current market sentiment facing Inc. Cleantech industry, we continue to navigate a U S finished financing harvest.
Yang Wu: Turning to slide six.
Yang Wu: We have some exciting new customers in the United States specialty vehicle market and the European e-trailer market. These customers will utilize Gen4 packs with our 53.5 amp hour cell technology. Why are we on?
Yang Wu: We have some exciting new customers in the United States specialty vehicle market and a European each bigger market.
Yang Wu: This customers while you denied June four paths with our $53 five on empower style tech knowledge.
Yang Wu: While we aren't.
Yang Wu: We are quite ready to announce the project publicly. We have made significant progress with the customers on product ramp-up and as a prototype development. Additionally, we are excited to be working with German OEM engineers on a prototype fuel cell truck that will debut at IAA 2024. I would now like to turn the call over to Mrs. Smith to discuss our financials in more detail.
Yang Wu: Quite ready to launch the project publicly.
Shane Smith: We have made significant progress with our customers on product ramp up and as a prototype development.
Shane Smith: Additionally, we are excited to be working with German OEM engineers on a prototype fuel cell truck that are well he bought at IAA, a 'twenty 'twenty four.
Yang Wu: I would now like to turn the call over to Mrs. Smith to discuss our financials in more details.
Nancy Smith: Thank you, Mr. Wu, and thank you, everyone, for joining us. I'll spend the next few minutes discussing our Q1 2024 financial results. Please turn to slide 8 and I will summarize the main line items from our Q1 P&L. We booked a record first quarter with revenue of $81.4 million, an increase of 73% from $47 million in quarter 1, 2023. This growth is driven primarily by strong sales demand in both our APAC and EMEA markets for commercial vehicles as OEMs continue to adopt our technology.
Shane Smith: Thank you Mr. Lu and thank you everyone for joining in.
Nancy Smith: In the next few minutes discussing our quarter, one 2024 financial results. Please turn to slide eight and I'll summarize the main line items from our Q1 P&L, we booked a record first quarter with quarter, one revenue of $81 4 million, an increase of 73% from $47 million linked quarter.
Nancy Smith: One 2023 this growth was driven primarily by strong sales demand in both our APAC and EMEA markets for commercial vehicles.
Nancy Smith: As Oems continue to adopt our technology.
Nancy Smith: Our gross margin improved to 21.2% in Q1 2024 compared to 10.3% in Q1 2023. After adjusting for non-CAT settled share-based compensation expense in our cost of sales, adjusted growth margin increased to 22.6% in Q1 2024 compared to 13.5% in Q1 2023. That's a 9.1 percentage point improvement.
Nancy Smith: Our gross margin improved to 21, 2% in quarter, one 2024 compared to 10, 3% in quarter one 2023.
Nancy Smith: After adjusting for non cash settled share based compensation expense and our cost of sale.
Nancy Smith: Adjusted gross margin increased to 22, 6% in quarter, one 2024 compared to 13, 5% in quarter one 2023.
Nancy Smith: That's a 9.1 percentage point in treatment.
Nancy Smith: Operating expenses were $40.9 million in Q1 2024 compared to $36.2 million in Q1 2023, an increase of 13% from the prior year period. After adjusting for non-cash SBC expense in SG&A, our adjusted operating expenses in Q1 2024 were $30.1 million compared to $19.8 million in Q1 2023, an increase of $10.3 million. This is mainly due to increasing headcount costs. Gap's net loss was $24.8 million in Q1 2024 compared to a net loss of $29.6 million in Q1 2023. After adjusting for non-cash SBC expense and changes in the fair value of our warrant liability, our adjusted net loss was $13 million in Q1 2024 compared to an adjusted net loss of $11.7 million in Q1 2023.
Nancy Smith: Operating expenses were $40 9 million in quarter, one 2024 compared to $36 2 million in quarter, one 2023, an increase of 13% from the prior year period.
Nancy Smith: After adjusting for noncash SBC expense in SG&A.
Nancy Smith: Adjusted operating expenses in quarter, one 2024, with $30 1 million compared to $19 8 million in quarter. One 2023, an increase of $10 3 million. This is mainly due to increasing head count costs.
Nancy Smith: GAAP net loss was $24 8 million in quarter, one 2024 compared to net loss of 29 6 million in quarter. One 2023 after adjusting for noncash SBC expense and changes in fair value of our warrant liability adjusted net loss of $13.
Nancy Smith: Ian in quarter, one 2024 compared to an adjusted net loss of $11 7 million in quarter one 2023.
Nancy Smith: The impact of these adjustments is shown in slide 9, and reconciliations of these non-gap metrics to the most comparable gap metrics are included in the tables at the end of our earnings press release. Slide 10 shows the geographic breakdown of our revenue for Quarter 1 2024 compared to the prior year period. As you can see, we booked outstanding sales increases. APAC sales were up 640% year over year and accounted for 29% of our revenue, up from just 7% a year ago.
Nancy Smith: The impact of these adjustments as shown in slide nine and 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.
Nancy Smith: Slide 10 shows the geographic breakdown of our revenue for quarter, one 2024 compared to the prior year period. As you can see we book outstanding sales increases APAC sales were up 640% year over year and accounted for 29% of our revenue.
Nancy Smith: From just 7% a year ago, our EMEA business was up by 184% year over year and accounted for 36% of our revenue up from just 22% a year ago as key customers begin their vehicle ramp up.
Nancy Smith: Our EMEA business was up by 184% year-over-year and accounted for 36% of our revenue, up from just 22% a year ago as key customers began their vehicle ramp-up. And with that, I'll turn it back over to Mr. Wu to briefly go over our outlook for the second quarter. Thank you.
Wu: And with that I'll turn it back over to Mr. <unk> to briefly go over our outlook since second quarter. Thank you.
Wu: Thank you.
Yang Wu: Please turn to slide 12, which provides a summary outlook for the upcoming month. For the second quarter, we expect revenue to be in the range of $90 to $98 million, up 25% from Q2 a year ago at the midpoint. This anticipated growth is primarily generated through increased deliveries to our APAC and EMEA commercial vehicle customers. We continue to strive for operational efficiencies, and we are maintaining our target growth margins to be in the range of 20 to 25 percent for AIPAC. We will be delivering 48 amp hour and 53.5 amp hour cells from our Huzhou facility.
Yang Wu: Please turn to slide 12, which provided a summary outlook for the upcoming months.
Yang Wu: For the second quarter, we expect our revenue to be in the range over $90 million to $98 million.
Yang Wu: Up 25% from Q2, a year ago at the midpoint.
Yang Wu: This anticipated growth is primarily generated through increased deliveries to our APAC and EMEA commercial vehicle customers.
Yang Wu: We continue to strive for operational efficiencies and we are maintaining our target gross margins to be in a range of 20% to 25%.
Yang Wu: For APAC.
Yang Wu: We will be delivering 48, empower and a 53.5 empower sellers from our Rudolph with Sidoti.
Yang Wu: We plan to do this while also targeting growth in Southeast Asia and continuing R&D progress on the new upcoming products. In EMEA, we anticipate Q2 2024 revenue to grow more than double year over year, expected to deliver new prototypes to customers, and plan to expand into additional commercial vehicle projects in the Americas. We continue to focus on securing our cross-bill financing and why y'all... remaining committed to fulfilling planted customers and their revenue growth.
Yang Wu: We plan to do this.
Yang Wu: <unk> also talked any growth in southeast Asia, and a continuing R&D progress on the new upcoming products.
Yang Wu: E M E. H, we anticipated Q2 2020 for revenue to gross more than double year over year.
Yang Wu: Expected to deliver Neil prototypes to customers.
Yang Wu: And plan to expand into additional commercial vehicle projects.
Yang Wu: For the Americas.
Yang Wu: We continue to focus on security our Crossrail financing.
Yang Wu: While ray.
Yang Wu: The remaining committed to fulfilling planning to customers and their revenue growth we.
Yang Wu: We are also exploring additional customer sales opportunities, including within the Canadian CV market. Thank you all for joining us today. We look forward to updating you on our progress again next quarter. Ladies and gentlemen, that concludes today's conference call. Thank you for joining, and you may now disconnect your lines. Thank you for watching!
Yang Wu: We have also continued.
Yang Wu: Exploring additional customer sales opportunities.
Yang Wu: Including within the Canadian CV market.
Yang Wu: Thank you all for joining US today, we look forward to updating you on our progress again next quarter.
Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.
Yang Wu: Ladies and gentlemen that concludes today's conference call.
Operator: Thank you for joining and you may now disconnect your lines.
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