Microvast (MVST) 9 May 232023 Q1 Earnings call transcript

Thank you for standing by. This is the conference operator. Welcome to the Microvast First Quarter 2023 Earnings Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, investment community professions have the opportunity to participant in the question-and-answer session. Instructions] [Operator

like for conference Microvast. now Gould, to turn Relations Investor Please to will over the Monica I go ahead.

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

President Mr. on and Officer; Chief Wu, call me Webster, Sascha are Officer. Joining Founder, Chief today's Craig Chairman, and Financial Revenue CEO; Kelterborn, Yang

its call, website, Relations earnings section the quarter Company's press on release, of this first found Investor Ahead which the ir.microvast.com. Microvast issued XXXX can be of

remarks. In to have accompany addition, posted presentation prepared we slide a management's

note to will management please forward-looking making statements to representative this should based on relied of as upon reminder, about revise events. forward-looking date these only assumptions expectations of not statements publicly views a and released future As in view They that are information be any or These of our and subsequent new call. results today. reflect light be as no of on revision and current as any for statements obligation we undertakes

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

factors discussion important risks including Microvast filed with Annual on filed SEC, of material Form affect today. March results, on could refer XX-K and Report the the filings the Company’s other XXXX, XX, to and the further please earlier the For financial that XX-Q

as a net Relations today's metric, the be and not Webcast will of of we of measures of our website. to results. should adjusted been GAAP our press is EBITDA, Investor or addition during available substitute included call and company to loss measures, non-GAAP are supplemental section These at for have from end profit, reconciled may an table These their call, this gross be adjusted the GAAP most comparable useful addition, the measures on and also release. we replay including isolation non-GAAP in In discuss non-GAAP as Microvast adjusted financial considered measures which performance. believe

call the for like And remarks. to with over turn opening Wu to that, I'd Yang

off in to And Officer, for our of I high turn by us all full who QX Financial overview some followed our a wins the you, will discuss before key start of to the for a in who with then detail. thank then to I our providing your the our Craig and quarter, over like address some opening Revenue call Officer questions. Thank level Webster, Kelterborn, financials joining outlook our will year call Sascha will will more up highlights. before the Chief XXXX Monica. discuss Chief you operational today. I'd quarter

a gross ramping a increase. significant million ended more achieved record We I XXXX first quarter by a order the turn $XX.X We from cover revenue customers percentage please driving European double-digit initial to expectations Slide backlog as margin, growth with Everyone, We customers. XX as led that to $XXX.X abate. a delivering in million than X of of sales revenue began by to chain supply and production quarter. XX.X% issues commercial This million. QX exceeded began our XX highlights the our European of point few vehicle posted intake housie year-over-year with first

Our started significant which of the China, trial a in in expansion, completion XX.XAh Huzhou the most our Phase QX X.X achievement cell. production was

hour estimate that in pack us gives and X production provided our especially increase potential. to and gigawatt customers, continue U.S. our initial line XXX of million the that We rate in module this cell schedules delivery We in by revenue with incremental Europe. capacity

a contracted. is customer our numbers, backlog the from already Huzhou year demand full new you of for there can see already over and our at product As significant XX% capacity is

and get to Asia broad U.S., for the based across progresses to be that customer and strong China the year orders as deliveries expect Europe, We increasingly Pacific and regions.

remaining X our will capacity hour. of this completed new a Huzhou year the targeted have for capacity It We'll Tennessee. U.S. initially Clarksville, for expansion This annual on now the of gigawatt construction year. QX facility an plans our production With our is in centered expansion full start mode. in

quick like We we QX assembly on the also earnings hub to update would provide Mexico container a 'XX our ESS call. mentioned

a have is new the line. are list facility working We close to U.S. on we which currently border. Mexicali, the very And assembly installing container

in Mexicali to finish of being with many from directly starting megawatt customer the our We project X.X ship QX Sunbelt. southwest facility in hour those containers located sites expect the to in the U.S.

discuss wins I would will Officer, now over achievements Sascha key some to the like turn Kelterborn, our Revenue in the and to who Chief of our call quarter.

thank Wu, today. for joining and Thank you, all us Mr. you

Approximately backlog. First, gives us projects. or from XX% including like significant our XX% will I would see on that which representing orders multiyear than our backlog a European project. both little over array vehicle million of of of ESS Record This color it includes a regions be growth platforms, commercial confidence are more the the more will wide for quarters. XX for U.S., XXX.X in customers backlog coming we many to customers is provide and

I from the Now quarter. please a turn few to first highlights Slide cover X as

very vehicle contract Following were customers for XX.XAh entry and sign one intercity new battery of will power orders bus significant in platforms. year, of which new our pleased costs with new initial city announcement we low January a our the very last to pack, the largest

the an battery order terms depending set from OEM ranges Our high requirements, charging density from they of XXX leading life. global a truck. capacity. mission to bus the Furthermore, over our and XCMG, pack energy crossway the construction with energy hybrid equipment on for up We years density in provide XX.XAh XXX battery hours, standards operators XXX and battery to units we of new of for XX kilowatt received packs on of

Gaussin battery vehicles. our for supply full hour to U.S. the XX.X also We major their where electric orders business, received new from pack we logistics

PX PX power is of delivery pack, walk-in XX.X skateboard box we will commercial as back vans, SOP On flattest and this delivery year EV hour electric the The of buses, industry suitable for it's our began which announcement earlier platform. full trucks, the such platform school trucks. Company's and our REE, applications with the

SOP And truck lastly, the to for duty ton OEM Chinese deliveries we this CAMC, XX pack our of battery XXAh contractor. leading start heavy

initial Our XX system for units. than the more of order delivery calls

expect We increase volumes order as Huzhou meet course fully XX.XAh continue over commitments. sales new automated our customer the production to our to up to of of ramp line in 'XX on we

to our turn Please commercial highlights vehicle the X, in significant which growth European business. Slide

revenue from initial customer ramp year supply projects, This by some European improving an several almost accounted by ago. to first quarter total our the was and driven which of of of mentioned the earlier tripled revenue in XX% X% a up Our and revenue I year-over-year chain. of added growth

U.S. significant Green electrification European sales Going forward, led government be driver engine by expect initiatives. with U.S. along to vehicle planned such combustion ban initiatives of continuing to we a IRA XXXX, as Deal initiatives,

side, the on XXXX. total governments example, have already bus XXX% vehicle commercial truck achieve sales For a XX by to pledged emission of and zero

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

line financial Thank I'll Slide you, I Sascha. And P&L. discussing Please few the XXXX summarize minutes QX XX. will spend our from our items main results, the to turn next QX

in $XX recorded off, $XX.X growth covered. primarily year-over-year ever million, as base, by XX.X% Sascha was QX increasing European deliveries customer we just QX XXXX. of of First million driven an revenue The our by highest from increase

one in QX to After compensation sales, X% in XX.X% rose gross settled for in margin percentage share gross improvement. largely was QX adjusting QX gross XXXX. and cost just production XXXX XXXX expense increase The services of to increase of XXXX in noncash more Our compared mix X.X R&D. compared of and XX.X% to a in to point X.X% efficiencies these based and in margin product margin QX due favorable

compared XX.X was million compensation million registered QX in Similar largest in XX.X million QX the million to $XX.X contributor SBC compared in $XX.X to XXXX. previous million in XXXX non-cash quarter a compared which expense decline QX XXXX. the operating in totaled in Operating for expenses, worth to XXXX. the quarters XXXX expense adjusting SG&A, expenses share our in expense $XX.X our with After in decrease million in to $XX.X operating QX of based QX to

GAAP expense million for million $XX.X After of our net in loss loss fair loss of net value million loss QX to XXXX. $XX.X an net compared XXXX of SBC in QX million in adjusted adjusting compared QX was $XX.X XXXX. $XX.X changes net liability, QX was and adjusted warrant non-cash in XXXX in to

tables see at our can comparable the impact the in the of of XX are the to and reconciliations You of Slide metrics end these release. these in included GAAP press earnings metrics adjustments most non-GAAP

Slide to XXXX QX geographic of year prior a our breakdown revenue period. XX the shows of compared

our our just key accounted revenue their a As European showed X% vehicle. XXX% year you began ago, a as see, XX% strong production our for serial can from up of of year-over-year increase customers and business

of electrified models European last is our the percentage vehicle commercial for first time. customers quarter, As we the outlined a backlog launching who large are from

We to production. volume expect XX.XAh especially customers European growth in segment, expand for our as the cell continue

Our U.S. year-over-year. increased revenue XX%

deliveries we the We half to XXXX our expect continue facility. U.S. strong gigawatt as hour In second markets we we begin revenue of our in U.S. Clarksville revenue meet rise the begin in year year. opportunities on to this project as U.S. growth the remain X.X to expect and ESS from to the beyond,

need than be expect we later on We sooner year current position and capacity we utilization in for will anticipated have based capacity. to start online, additional planning should high Clarksville Once rather orders. where this to a

know, As orders. investment you decisions on always our confirmed predicated customer capacity further expand are to

as cash, and X.X Negative during million. of which ended activities Turning our million. XX, totaled million to the to we QX XXXX, on primarily Slide $XX.X result $XXX.X cash quarter X.X mostly of flow was equivalents, of Huzhou cash children short-term using and restricted spend loss. $XX.X quarter our $XX.X investments million, Net a which operating Clarksville due cash CapEx was the free cash with operating in was

will ongoing expenditures We finance that had meet also remaining our suppliers. now capital facilities we be R&D X.X facilities facility. remaining totals will balance With to improvements believe around project and million equipment final for projects. the payments be million that Huzhou existing from satisfied down all for completed, to contractors of our and We on totaling payments, $XX drilling milestone $X.X

strong again closed the was once XX% sequential underpins access start sales for the full our This options. We us growth year The Europe. conviction of in to fourth the $XXX.X growth This quarter projects up our and growth vehicle backlog high our $XXX.X guidance of quarter. record belief XXXX is in allowing is commercial of million that from financing a million driven by already in number more our Microvast. years in with backlog just

added remains credit million a we $X.X QX, line $XX of undrawn. which million In

to quarter-over-quarter. continue Our increase sales

QX. current credit to our of We $XX add is to that $XX by further line expect we million estimate add working would and the million additional capital a end

year the full used that estimate capital expenditures we construction and primarily in will ahead, $XXX million million will of to ongoing in Looking Clarksville. $XXX remain range be for

debt easily online our As resonate bring mentioned believe Clarksville from in with modest margin capacity we additional IRA experience lenders. have it the can support clearly before, growth backlog, The financing. and and cash we flow applied and will some proven

it turn I'll to that, review outlook. our to With Mr. back over Wu

Pretty turn Craig. XX. Slide to Thanks

result year $XXX the full range XX% raising a million range to As reflecting in to of first $XXX million of revenue $XXX of we our growth the are a XX%. million, quarter, XX% for to year-over-year $XXX revenue of outperformance from million, annual growth representing a to to our XX% guidance

QX revenue Pacific. million, midpoint, For the our as range commercial expect the by Asia the of continue year up to from ago well a in $XX customers to at $XX the the driving second as ramp European orders of projects, in be vehicle we from million slightly quarter,

good for European by and visibility With into backlog, production entering XXXX projects, and our a to energy business. the commercial driving strong ramp up phase storage have we growing the vehicle continue

will our volumes strong that beyond. globally customer ramped and year throughout momentum We are expect the seeing products and demand as our for continue

project accelerating margin our On made that execution call, first gross backlog noticed ability with and and the the last we We're in our in to quarter, revenue improvement. gross, both completing driving substantial quarter's expansion remain I to capacity it Huzhou the progress critical a our targets. will achieve very pleased

expect Microvast emissions legislation Reduction advancing clean Act forward. energy to business opportunities that while reduce the exciting, continue be We carbon the of U.S. and XXXX creating indirect initiatives for Inflation even and to a going in important our direct more helping

the to And Q&A I ability Our been global a advantages session. a work mission to start our an to team personally will for culture to and team our orientated competitive before their and execute over Microvast. like operator Microvast tireless a the Microvast the back focused, be the commitment has turning or to call are would thank

[Operator Instructions] And our Rusch Colin Oppenheimer. from comes from first question

Your line is open.

margin layer ramp incremental just XX.XAh to that bit little Congrats I Can some want that on ability on of the you're about talk to the your another and dig trends into get up drive a you some seeing deeper. higher yield capacity you the you the margin up as gross improvement as levels? here. to revenue cells

want you question to you question. after this do Craig, this want be or

we're Yes, the as take from not I'll it on to in discounts year good hear big expecting was not Colin what later see we We were lines. getting XX.X. the production and QX automated fully voice. to move volume

when to the later high year, a producing kick have utilization improvement, we and be to margin the fully QX feed As scheduled this that going really into volume in we gross discount, off we're QX, year. gotten forward lines, customers production as particularly to expect that's through move because automated

the bit in sort and of progress that country? and with can into getting or facility, And little it a equipment equipment of buying you any you're making Excellent. then talk the procurement headwinds U.S. that about terms

and different on well, I that And we China that's U.S. giant the the the expected be installation and can And remain. the factory track that's much answer plan to before we're just facility overcome China. to U.S. and year. same equipment the of looser, we build this question. same all smoother. this maturity equipment the certification. U.S. why to And system, as on is be the crew certification going And That's supplier, UL China, in our still site installation. the I much is training problems of experience, think to going we is require actually that the with this China behind why of to a XXX% The much, end also send the operation experiencing we narrow U.S. still a plan the is installation China slightly, the for operation U.S.

move it's just the close appreciate great POS and the And to out curious that. process, through sales your backlog the customers sales on about incremental and fine here then to But pipeline I'm of business number for ability XXXX, this that is customers a moving the of year. backlog through pipeline? got someone assume I and sense how to just how get ship book balance are want but the those you've much for and have

take this question? you Craig, can

we for mainly the out And great have to testing is ongoing you. solutions. backup have fleet hear speaking, tasks, ongoing Colin, Okay. new battery customers we 'XX. Generally probably 'XX, we will

So this -- be be will there and of sure. there a will for year bit back of within increases

already remember, So, to testings sometimes bigger we test and fill in lot sure. started summon you winter a to a this for issue, QX have XXXX tests. by in with And we as and go will certain effects of probably QX customers to

Amit And our Dayal Wainwright. next from with comes H.C. question

open. is line Your

and to see you after comes execution Thank good everyone. Good through. the

facility? is guy, CapEx the the Clarksville towards on primarily Just $XX million targeted

I all right. that's Clarksville. Amit, now going spend is mean, the forward

got remaining about then, done, seeing the will from funded So, just really we've the getting And Clarksville engagement the and get we're increase. of as undrawn milestone level that what's contractors, was but they customers, through backlog slides, feed payments good from we're into facility. in Huzhou that saw is you to

credits we then and in proving is And of because gets the The were can the seeing backlog. that we U.S. closed of a huge backlog lenders, the them of expansion. lot this lender capacity will what the there's can actually grow terms IRA that in we're we interest the be benefit that out experienced

really how cash via we're do back, in sheet. backlog the are And position We're the growing just bring us on And very can Amit. so the equipment capital clearly be ramp on strong debt the to cloud and don't exact in Company the side of that shown raising U.S., to the able year. balance because growing we're a question and it's coming per same we've that We market. in phase, close revenues it into say, which puts de-risk, equipment this into to Colin's they we equity

really, capacity China, mean, [Technical Difficulty] so in I

up. the breaking you're Can Amit, you question? repeat

Difficulty] [Technical

line is your No, not good.

cell you Mr. try conference get sight window you're maybe the or assume of a is to clear again. a and can This of I kind on line phone Dayal, operator. a

there anyone question? is Operator, a else for ready

we've got Dayal. think Mr. I

from to Cassidy can that pose for back. in I We've is the wait some the Relations this questions come meanwhile we'll Hi, Investor team. gotten him

beyond first ESS, should in what The when you expect and is ramp? co-projects have them to commercial to do do the U.S. we begin

audience. Cassidy, which that's great came a from the question

vehicle QX commercial and speaking, Colin, mainly which upcoming we couple special are generally as So coming vehicle QX. in have I a already, and mentioned projects to

quite names will still able under think disclose soon we're customer are NDA, be but together. project we also we that our to the with We

one you and talk we your Can competitive us through versus for received where the cell have the are that ramp market competitors more process is. in and the and of is you Perfect XX.XAh what up?

this question. I can answer

know much gives to dedicated this a when battery the power still they time cycle the a high than over vehicle. like and the certify this long life, and to energy years, we longer is you is to we this take lifespan so competitors very for to battery. designed density You three very test three the the XX.X and commercial two they to vehicle the times know battery developed power remain battery there's commercial This and the and longer

And our which that longer performance, compare know system you us total yes send car, going reach that's we life give with needs seen haven't battery the much drive better the it. to know it's know which competitors, that we the much return. know this you longer competitor give this longer seen and the haven't to projects and use vehicle Commercial module you investment to why to like the much what to dedicated a compare life everybody it's and three battery and times with distance passenger battery batteries

[Operator questions. closing Instructions] seeing Wu no Mr. back I I'll am comments. turn it further for to

Okay. have good day Wish and night, a Thank joining you good good a meeting. all today's for Thank you. everybody dream.

our Thank you concludes joining conference call. evening. a and pleasant That for have