Q2 2024 Microvast Holdings Inc Earnings Call

, , , , , , , , , , , , , ,

Speaker Change: In the next video, we'll see you in the next video.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Microvast Second Quarter 2024 Earnings Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. I would now like to turn the conference over to Mr. Yasir Ali, Chief Financial Officer of Microvast Holdings.

Yasir Ali: Thank you, operator, and thank you everyone for joining us today. Joining me on today's call is Mr. Yang Wu, founder, chairman, and CEO of Microvast Holding. Mr. Wu will start off with a high-level overview of the quarter before providing some operational details. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our second quarter 2024 outline. Ahead of this call, Microvast issued its second quarter earnings press release, which can be found on the Investor Relations section of the company's website, ir.microvast.com.

Conference Operator: Thank you for standing by. This is the conference operator.

Speaker Change: Welcome to the Microwast, 2nd quarter 2024 earnings call.

Yasir Ali: As a reminder, all participants are in listen-only mode and the conference is being recorded. I would now like to turn the conference over to Mr. Yasir Ali, Chief Financial Officer of Microvast Holdings. Please go ahead. Thank you. Thank you. Thank you.

Yang Wu: Thank you, Operator, and thank you everyone for joining us today. Joining me on today's call is Mr. Yang Wu, founder, chairman, and CEO of Microvast Holdings.

Speaker Change: Mr. Wu will start off with a high-level overview of the quarter before providing some operational updates.

Speaker Change: I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our second quarter 2024 outlook.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Microvast 2nd quarter 2024 earnings call.

Operator: As a reminder, all participants are in listen only mode, and the conference is being recorded. I would now like to turn the conference over to Mr. Yaser Ali, chief financial officer of Microvast Holdings. Please go ahead.

Speaker Change: Ahead of this call, Microvast issued its second quarter earnings press release, which can be found on the Investor Relations section of the company's website, ir.microvast.com.

Speaker Change: In addition, we have posted a slide presentation to the company's website to accompany management's prepared remarks.

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

Yasir Ali: In addition, we have posted a slide presentation on the company's website to accompany management's prepared remarks. As a reminder, please note that statements made in this call may include forward-looking statements and are 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.

Yaser Ali: Joining me on today's call is Mr. Yang Wu, founder, chairman, and CEO of Microvast Holdings. Mr. Wu will start off with a high level overview of the quarter before providing some operational updates.

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

Speaker Change: They should not be relied upon as representative.

Yaser Ali: I will then discuss our financials and more detail before handing it back to Mr. Wu to wrap up with our 2nd quarter 2024 outlook.

Speaker Change: 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.

Yaser Ali: A head of this call, Microvast issued its 2nd quarter earnings press release, which can be found on the investor relations section of the company's website, ir.microvast.com. In addition, we have posted a slide presentation to the company's website to accompany management's prepared remarks.

Speaker Change: Actual results may differ materially from expectations due to a variety of risk and uncertainty.

Speaker Change: For more information on material risk and other important factors that could affect our financial results, please refer to our filings with the SEC.

Yaser Ali: As a reminder, please note that statements made in this call may include forward-looking statements 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. Actual results may differ materially from expectations due to a variety of risk and uncertainty.

Speaker Change: 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.

Speaker Change: These non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release.

Speaker Change: After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microwave's website and now I will turn the call over to Mr. Wu for opening remarks.

Yasir Ali: 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.

Yang Wu: Thank you, and thank you everyone for joining today's call. Please turn to slide three as I cover a few highlights from the second quarter. The business posted record second quarter revenue with 12% growth year over year in Q2 2024, delivering revenue of $83.7 million. We achieved this growth while maintaining a growth margin of 32.5%. A 17.2% improvement year over year. This incredible growth comes largely from sales increases in EMEA business. We saw triple-digit percentage growth of 401% for EMEA. Please join me on slide 5.

Yaser Ali: For more information on material risk and other important factors that could affect our financial results, please refer to our filings with the SEC. We may also discuss non-GAP financial measures during this call. These measures should be considered in addition to and not as a substitute for or in isolation from GAP results. These non-GAP measures have been reconciled to their most comparable GAP metrics in the tables included at the end of our press release.

Mr. Wu: Thank you, and thank you everyone for joining today's call.

Mr. Wu: Please turn to slide 3 as I cover a few highlights from the second quarter.

Speaker Change: The business poster, Rodney Worthen

Rodney Worthen: Record, second quarter revenue with 2% gross year over year in Q2 to 124 Delivering revenue of 87.7 million

Speaker Change: We achieved this growth while maintaining a growth margin of 32.5% at 17.2%.

Yang Wu: After the conclusion of this call, a webcast replay will be available on the investor relations section of microvast website and now I will turn the call over to Mr. Wu for opening remarks. Thank you and thank you everyone for joining today's call. Please attend to slide three as I cover a few highlights from a second quarter. The business posted a record second quarter revenue with 12% growth year over year in Q2, 2024.

Speaker Change: Improvement year over year. This incredible growth comes largely from sales increases in EMEA business year over year. We saw triple-digit percentage growth of 401% for EMEA.

Yang Wu: The company was successful in further expanding its commercial vehicle footprint. We have entered into a strategic partnership with Envoy and the Weijin Pioneer in the electric boat motor system. We have begun to tap into the Korean market and have secured a 40 million order from a Korean e-box customer. We closed the second quarter with a backlog of 278.6 million and continue to strive for operational efficiency.

Speaker Change: Please join me on Slide 5.

Speaker Change: The company was successful in further expanding its commercial vehicle footprint. We have entered into a strategic partnership with Envoy.

Wei-Jing Panier: and Wei-Jing Panier in Electric Boat Motor System.

Yang Wu: Delivering revenue of 83.7 million. We achieved this gross wire maintaining a gross margin of 32.5% at 17.2% improvement year over year. This incredible gross comes largely from sales increases in EMEA business year over year. We saw triple digit percentage gross of 41% for EMEA.

Speaker Change: We have begun to tap into the Korean market and have secured a 40 million order from a Korean e-bus customer.

Speaker Change: We closed the second quarter with a backlog of 278.6 million and a continue to strive for operational efficiency.

Yang Wu: The company posted significant improvements to adjust the gross margin at 34.3%, a 17% point increase year over year. The company posted yet another banner quarter, and we expect continued growth and success. But this also comes with challenges. In addition, to decelerate the rollout of light commercial vehicle platforms in the European market, we experienced delay in CV customer deliveries pushed into the second half of this year. Turning to slide 6.

Speaker Change: The company posted significant improvements to adjust the gross margin at 34.3%, a 17-percentage point increase year over year.

Speaker Change: The company posted yet another banner quarter and that we expect continued growth and success.

Yang Wu: Please join me on slide five. The company was successful in further expanding its commercial vehicle footprint. We have entered into a strategic partnership with Invoi and the Waging Pioneer in electric boat motor system. We have begun to tap into the career market and have secured a 40 million order from a Korean e-bots customer. We closed the second quarter with a backlog of 278.6 million and continue to strive for operational efficiency. The company pushed its significantly improvement to adjust the gross margin at 34.3%, at 17% age point increased year over year. The company posted yet another banner quarter and we expect continued gross and successes.

Speaker Change: So this also comes with challenges.

Speaker Change: In addition, to decelerate the rollout of light commercial vehicle platforms in European market, we experienced delay in CV customer deliveries pushed into second half of this year.

Yang Wu: We have some exciting new customers globally in various commercial vehicle segments. These customers will utilize Gen4 PACs and MV-iPAC with our 53.0Ah and 48Ah cell technology. While we aren't quite ready to announce the project publicly, we have made significant progress with the customers on ramp-up and prototype development. Additionally, we are excited to be working with Envoy on E-Boat Motor Systems. I would now like to turn the call over to Mr. Ali to discuss our finances in more detail.

Speaker Change: Turning to slide 6.

Speaker Change: We have some exciting new customers globally in various commercial vehicle segments.

Speaker Change: This customers will utilize geneful parts and M.V. I. Pack with our 53-point M. Power and a 48-M. Power Cell Technology.

Speaker Change: While we aren't quite ready to announce the project publicly, we have made significant progress with the customers on ramp-up and prototype development.

Yang Wu: So this also comes with challenges. In addition to the accelerated rollout of light commercial vehicle platforms in European market, we experienced delay in CV customer deliveries, pushing to second half of this year.

Speaker Change: Additionally, we are excited to be working with Envoy on E-Boat Motor Systems.

Speaker Change: I would now like to turn the call over to Mr. Ali to discuss our financials in more detail.

Yasir Ali: Thank you, Mr. Wu, and thank you everyone for tuning in. I'll spend the next few minutes discussing our Q2 2024 financial results. Please turn to slide 8 and I will summarize the main line items from our Q2 P&L. We booked a record second quarter with Q2 revenue of $83.7 million, an increase of 12% from $75 million in Q2 2023. This growth is driven primarily by strong sales demand in EMEA markets for commercial vehicles as OEMs continue to adopt our technology.

Ali: Thank you Mr. Wu and thank you everyone for tuning in. I'll spend the next few minutes discussing our Q2 2024 financial results.

Yang Wu: Turning to slide six, we have some exciting new customer globally in various commercial vehicle segments. These customers will utilize gene4 packs and MVI pack with our 53 point anti-hour and 48 ampere cell technology.

Ali: Please turn to slide eight and I will summarize the main line items from our Q2 PNL.

Mr. Ali: We booked a record second quarter with Q2 revenue of $83.7 million, an increase of 12% from $75 million in Q2 2023.

Yang Wu: While we are quite ready to announce the projects publicly, we have made significant progress with the customers on ramp-up and prototype development.

Ali: This growth was driven primarily by strong sales demand in EMEA markets for commercial vehicles as OEMs continue to adopt our technologies.

Yaser Ali: Additionally, we are excited to be working with Invoi on e-boat motor systems. I would now like to turn the call over to Mr. Ali to discuss our financials in more detail. Thank you, Mr. Wu and thank you everyone for tuning in. I'll spend the next few minutes discussing our Q2 2024 financial results. Please turn to slide eight and I will summarize the main line items from our Q2 PNL. We booked a record second quarter with Q2 revenue of 83.7 million an increase of 12% from 75 million in Q2 2023.

Yasir Ali: Our gross margin improved to 32.5% in Q2 2024, compared to 15.3% in Q2 2023. After adjusting for non-cash, Settled Share Based Compensation Expense, and Cost of Sales, adjusted gross margin increased to 34.3% in Q2 2024 compared to 17.3% in Q2 2023. That's a 17 percentage point improvement. This increase in gross margin was due to a combination of factors, including better economies of scale through improving utilization, a more favorable product mix, and lower raw material prices.

Ali: Our gross margin improved to 32.5% in Q22024 compared to 15.3% in Q22023, after adjusting for non-cash.

Ali: Settled Share Based Compensation Expense.

Ali: and Costa Sales.

Ali: adjusted gross margin increased to 34.3% in Q2, 2024 compared to 17.3% in Q2, 2023.

Ali: That's a 17 percentage point improvement.

Yaser Ali: This growth was driven primarily by strong sales demand in e-mia markets for commercial vehicles as OEMs continue to adopt our technologies. Our growth margin improved to 32.5%, in Q2 2024, compared to 15.3% in Q2 2023. After adjusting for non-cash settled share-based compensation expense and cost of sales, adjusted gross margin increased to 34.3% in Q2 2024 compared to 17.3% in Q2 2023. That's a 17% point improvement. This increased in gross margin was due to a combination of factors, including better economies of scale through improving utilization, more favorable product mix and lower raw material prices.

Ali: This increase in gross margin was due to a combination of factors, including better economies of scale through improving utilization, more favorable product mix and lower raw material prices.

Yasir Ali: Operating expenses were $103.6 million in Q2 2024 compared to $39 million in Q2 2023, an increase of 166% from the prior year period. This increase in operating expenses is mainly due to the impairment loss of long-lived assets of $64.9 million, 64.8 million of which was for impairment losses in the US as we decided to seize the use of certain buildings and facilities under our strategic shift towards LFP technology in the US.

Ali: Operating expenses were 13.6 million in Q2 2024 compared to 39 million in Q2 2023.

Ali: An increase of 166% from the prior year period. This increase in operating expense is mainly due to the impairment, loss of the long-lived asset of 64.9 million.

Ali: 64.8 million of which was for impairment losses in the U.S. as we decided to seize use of certain buildings and facilities under our strategic shift towards LFP technology in the U.S.

Yasir Ali: Without adjustments or impairment losses, our operating expense would have been $38.7 million in Q2 2024. After adjusting for non-cash SPC expense in SG&A, our adjusted operating expense in Q2 2024 was $92.9 million, compared to $22.7 million in Q2 2023. An increase of 70.2 million, mainly due to the impairment loss mentioned just now. Gap's net loss was $78.4 million in Q2 2024 compared to a net loss of $26.1 million in Q2 2023. After adjusting for non-cash SVC expense and changes in the fair value of our warrant liability and convertible loan with shareholders, our adjusted net loss was $64.7 million in Q2 2024 compared to an adjusted net loss of $8.3 million in Q2 2023.

Ali: Without adjustments or impairment loss, our operating expense would have been $38.7 million in Q2 2024.

Yaser Ali: Operating expenses were 103.6 million in Q2 2024 compared to 39 million in Q2 2023, an increase of 166% from the prior year period. This increase in operating expense is mainly due to the impairment loss of the long-lived assets of 64.9 million. 64.8 million of which was for impairment losses in the US as we decided to seize use of certain buildings and facilities under our strategic shift towards LFP technology in the US.

Ali: After adjusting for non-cash SPC expense in SG&A, our adjusted operating expense in Q2 2024 were $92.9 million.

Ali: Compared to $22.7 million in Q2 2023, an increase of $70.2 million mainly due to the impairment loss mentioned just now.

Ali: Gap net loss was $78.4 million in Q2 2024 compared to net loss of $26.1 million in Q2 2023.

Yaser Ali: Without adjustments for impairment loss, our operating expense would have been 38.7 million in Q2 2024. After adjusting for non-cash SPC expense in SGNA are adjusted operating expense in Q2 2024 were 92.9 million compared to 22.7 million in Q2 2023. An increase of 70.2 million mainly due to the impairment loss mentioned just now. Gap net loss was 78.4 million in Q2 2024 compared to net loss of 26.1 million in Q2 2023. After adjusting for non-cash SPC expense and changes in fair value of our warrant liability and convertible loan with shareholder adjusted net loss was 64.7 million in Q2 2024 compared to an adjusted net loss of 8.3 million in Q2 2023.

Ali: After adjusting for non-cash SPC expense,

Ali: and changes in fair value of our warrant liability and convertible loan with shareholder.

Ali: Adjusted net loss was $64.7 million in Q2 2024 compared to an adjusted net loss of $8.3 million in Q2 2023.

Ali: 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.

Yasir Ali: 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 Q2 2024 compared to the prior year period. As you can see, we booked an outstanding sales increase. Our EMEA business was up by 401% year over year and accounted for 55% of our revenue, up from 13% a year ago as key customers began their vehicle rental. And with that, I will turn it back over to Mr. Wu to briefly go over her outlook for the third quarter.

Ali: Flight 10 shows the geographic breakdown of our revenue for Q2 2024 compared to the prior year period. As you can see, we booked outstanding sales increases.

Ali: Our Union Business was up by 401% year over year in a counter for 55% of our revenue.

Ali: Up from 13% a year ago, as key customers began their vehicle rent, and with that, I will turn it back over to Mr. Wu to briefly go over her outlook for the third quarter.

Yaser Ali: 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 Q2 2024 compared to the prior year, as you can see we booked outstanding sales increases. Our e-nya business was up by 401% year-over-year and accounted for 55% of our revenue.

Yang Wu: Please turn to slide 12, which provides A Summary Outlook for the Upcoming Month. For the third quarter, we expect revenue to be in the range of $85 to $90 million, up 9% from Q3 a year ago at the midpoint. This anticipated growth is primarily expected to be 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 margin of 25% for AIPAC.

Mr. Wu: Thank you.

Mr. Wu: Please turn to its light 12, which provides a summary outlook for upcoming months.

Speaker Change: For the third quarter, we expect revenue to be in the range of $85-90 million, up 9% from Q3 a year ago at the midpoint.

Speaker Change: This anticipated growth is primarily expected to be generated through increased deliveries to our APAC and the EMEA commercial vehicle customers.

Mr. Wu: We continue to strive for operational efficiencies and we are maintaining our target growth margin of 25%.

Yang Wu: Up from 13% a year ago as key customers began their vehicle rents and with that I will turn it back over to Mr. Wu to briefly go over our outlook for the third quarter. Thank you.

Yang Wu: We will be delivering 21 amp hour cells from our Huzhou facility. We plan to do this while also targeting growth in Southeast Asia and continuing R&D progress on new upcoming products. In EMEA, we anticipate Q3 2024 revenue to grow more than 100% year over year and expect to ramp up serious deliveries to the European Commercial Vehicle OEM for the Americas. We continue to focus on financing solutions to complete the class bill while exploring new commercial vehicle markets in the Americas. Turning to slide 13.

Speaker Change: Play Pack.

Mr. Wu: We will be delivering 21 Amp-hour cells from our Huzhou facility.

Yang Wu: Please turn to slide 12 which provide a summary outlook for upcoming months. For the third quarter we expect revenue to be in the range of 85 to 90 million. Up 9% from a Q3 a year ago at the midpoint. This anticipated growth is primarily expected to be 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 margin of 25%.

Mr. Wu: We plan to do this while we...

Mr. Wu: Also tucked in growth in Southeast Asia and a continuing R&D program, a new upcoming product.

Mr. Wu: EMEA, we anticipated Q3, 2024 revenue to grow more than 100% year over year, and expect to run out the serious deliveries to the European commercial vehicle EMEA.

Mr. Wu: for the Americas.

Speaker Change: We continue to focus on financing solutions to complete the class bill.

Speaker Change: while exploring new commercial vehicle markets in the Americas.

Yang Wu: We are excited to launch our new battery technology, the 565 amp hour LFP cell. This is the newest product line in our extensive battery portfolio. This 565 ampere LP cell provides a host of specifications designed to meet the needs of renewable energy customers, including lower cost, enhanced reliability, and a longer lifespan. Additionally, our domestically produced LFP batteries are expected to qualify for IRAS Section 45X, enhancing their economic attractiveness for Microvast and our customers.

Yang Wu: For APAC we will be delivering 21 amp-hour sales from our Huzo facility. We plan to do this while we are so targeting growth in Southeast Asia and continue our in-depth progress on new upcoming products. In EMEA we anticipated Q3 2014 revenue to grow more than 100% year-over-year and expect to run part of the series deliveries to the European commercial vehicle OEMs. For the Americas we continue to focus on financing solutions to complete the cross-bale. While exploring new commercial vehicle markets in the Americas.

Mr. Wu: Turn into like 13.

Speaker Change: We are excited to launch our new battery technology, the 565 mAh LFP cell.

Mr. Wu: This is the newest product 9 in our extensive battery portfolio.

Speaker Change: This 565 ampere LP cell provides a host of specifications designed to meet the needs of renewable energy customers, including lower cost, enhanced reliability, and a longer lifespan.

Speaker Change: Our domestically produced LAP batteries are expected to qualify for IROT Section 45X, enhancing their economic attractiveness for Microsoft and our customers.

Yang Wu: Please join me on slide 14, where you can see our new LFP-based ME6 energy storage solution. This new product offers a compelling combination of benefits, including up to 30 years of lifespan with Microvast's new overhaulable battery design, boosting high energy density offering a six megawatt hour in a compact 21 foot container. High Efficiency and Optimized Total Cost Ownership with a Robust Design; we are excited to work to bring this product to market. Thank you all for joining us today. We look forward to updating you on our progress again next quarter. [Music]

Speaker Change: Please join me on slide 14.

Yang Wu: Turn into slide 13. We are excited to launch our new battery technology, the 565 amp-hour LFP cell. This is the newest of the product 9 in our expensive battery portfolio.

Speaker Change: where you can see our new LFP-based ME6 energy storage solution.

Speaker Change: This new product offers a compelling combination of benefits, including up to a 30-year lifespan with Microbot's new overhaulable battery design.

Yang Wu: This 565 amp-hour LFP cell provides a host of its specifications, designed to meet the needs of renewable energy customers, including lower cost, enhanced reliability, and a longer lifespan. Our domestically produced LFP batteries are expected to qualify for IRA section 45F, enhance their economic attractiveness for microvast and our customers.

Speaker Change: Boosting a high-energy density offering a 6 megawatt hour in a compact 21-foot container, high efficiency, and optimized total cost ownership with a robust design, we are excited to work to bring

Speaker Change: This product to market.

Speaker Change: Thank you all for joining us today. We look forward to updating you on our progress again next quarter.

Yang Wu: Please join me on slide 14. Where you can see our new LFP-based ME6 any storage solution. This new product offers a compelling combination of benefits, including up to 30-year lifespan with microvast and new, over-hoewful battery design. Boosting a high-energy density offering a 6-megawatt hour in a compact 21-foot container. High Efficiency and optimize the total cost ownership with the robot design.

Operator: Thanks for watching, and don't forget to like, share, and subscribe to our channel. [music] Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music

Speaker Change: Unknown Speaker 0ed

Yang Wu: We are excited to work to bring this product to market.

Yang Wu: Thank you all for joining us today. We look forward to updating you on our progress again next quarter.

Speaker Change: Unknown Executive, Yang Wu, Unknown Executive, Yang Wu, Unknown Executive, Yang Wu, Unknown

Unknown Executive: [inaudible][inaudible][inaudible] and thank you for your time[inaudible]

Speaker Change: In the next video, we'll see you in the next video.

Speaker Change: is the first time I've ever seen a girl in the world.

Speaker Change: [inaudible] C.C.C.C.C.C C.C.C.C.C.C.C C.C.C.C.C.C C.C.C.C.C