Microvast Holdings, Inc. Price & Performance (MVST)

Thank you operator and thank you everyone for joining our update today. With me on today's call are Mr. Yang Wu, Founder, Chairman and CEO and Ms. Ferry Alcambabi, CFO. Mr. Wu will start off with a high level overview of the full year and fourth quarter results before providing some operational and business updates. Ms. Kambavi will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our 2025 outlook and closing remarks. Ahead of this call, Microvast issued its fourth quarter earnings press release. Can be found on the Investor Relations section of our website. Ir.microvast.com. We have also posted a slide presentation to accompany management's prepared remarks today. As a reminder, please note that this call may include forward looking statements. These statements are based on current expectations and assumptions and should not be relied upon as representative of use for subsequent dates. We also 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 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.

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 on the Investor Relations section of Microvast's 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.

I would like to start by welcoming both new and legacy listeners and investors and give a quick snapshot of who Microvast is as a company. Microvast is a global leader in advanced battery technologies. Headquartered in Texas, where I founded in 02/2006, With over seven seventy five patents, and with electrified solutions deployed worldwide, We are committed to driving innovation in the energy transition and creating a sustainable future. T2024 product highlights including the ME6 our industry first over hoible LFP based energy storage system. Designed for a wide range of applications from utility scale storage to data center power. We also made significant advancements in silicon based cell technologies and progress toward all solid state batteries. Innovation remains central to our growth strategy. So stay tuned for exciting development. Please join me on slide four as I cover a few highlights. We achieved record annual revenue of $380,000,000 an increase of 24% year over year. With 123% increase in EMEA revenue. Fourth quarter revenue also has a record of 113,400,000.0 with a strong 36.6% gross margin. Our overall gross margin improved to 31.5% from 18.7% year over year. And we delivered an adjusted EBITDA of 8,600,000.0 in the fourth quarter.

Demonstrating the effectiveness of our strategic execution. The chart are displaying our growth story starting in 2022 through 2024. Our revenue has nearly doubled in this timeframe. Which demonstrates the increase in market demand for our high performance and diversified products. On the gross profit side, we have grown by a multiple of more than 12x. Including year over year improvements in the gross margin by 12.8 percentage points. We continue to progress toward maturity within our industry. With a focus on profitability and our ability to leverage operations, at scale. Turning to Slide five, I will briefly touch on our business strategy as we have communicated throughout 2024 we are focused on improving both efficiency and profitability. Microvast executed the strategies of our business in EMEA and APAC. While implementing strategic cost cutting measures in The United States. So 2024 was a challenging year. We believe we are at the turning point of a sustainable profitability and aim to continue focusing on those metrics for 2025. We have made measurable strides in the business which allow us to take actions that prioritize our commercially available technologies. We continue to adapt and grow with the changing market opportunities where we see customer demand.

Our core focus for continued growth success includes becoming cash flow positive maintaining our strong gross margin profile while we expand to meet customer demand. And grow our sales with new products and new market segments We intend to achieve this through continued innovation capturing new markets, and expanding both our capacity and a global electrification footprint. Turning to Slide six. We will go over some operations and development updates. We are happy to give a progress update our Huzhou Phase 3.2 expansion project. This new line should give us up to an additional two gigawatt hour per year of production capacity in order to meet the high demand for our products. Ken Rose utilities and equipment installation are all well underway. The expansion leverages our existing infrastructure and expertise and will help enable us to produce both current and future technologies. Anticipate first qualified production to come online in the fourth quarter of twenty twenty five. Our recent announcements such as our industry first overheueable ME6 energy storage system, our old solid state battery, and enhance the silicon based cells' continual progress. We hope to share more news for those products in the coming months. Please join us on Slide seven to go over our successes.

In the year. Along with some challenges that we faced We delivered our highest annual revenue which was up to 24% year over year our backlog has grown to $401,300,000 as original demand for our technology continues to rapidly grow. We have also realized great successes in the global heavy industry segments. [indiscernible] maturing Korean market The company saw tremendous demand increase in EMEA market for Microvast products with backlog growth covering the product supply in the short term. We also received the customer nomination for next generation battery products from one of our leading European CV OEMs. An industry shift in heavy machinery leveraging our technologies lead to additional orders from the current and new customers alike as demand for our high performance products continues. Microvast held 100% of the supply of hybrid drugs to LGMG in 2024. The company boost cooperation with ZoomLine for its hybrid trucks and enter in an annual framework agreement. For all of its hybrid mining trucks. Additionally, Microvast has deepened its relationship with Propeller to expand its new models and market segments. We faced the challenges in 2024. Including a difficult financing environment supply constraints, and increased competition APAC region. We responded with the strategic cost control and operational adjustments.

Slide eight through 11, shows some of our resident customer wins, I will go over a few examples that display the market expansion and the delivery of successes we have seen with our diversified product portfolio. First, with ZoomLine, we are to be the exclusive supplier for its line of hybrid mining trucks. Powered by our high power 53.5 amp power generation four packs. Our high power cells have been increasingly adapted by the mining industry for their performance. Safety and reliability in extreme conditions. We are also working with Dongfeng trucks to bring mass production of its commercial trucks to the market. Which will utilize our 21 amp hour and 70.5 Ah generation three packs. On the agriculture side, we are working with LGAG, to bring the world's largest extended range heavy duty tractors to life with our 48 amp hour generation four packs Microvast continue to pursue the trend in agriculture and is excited to help lead the industry in electrification. The company has also engaged with sound mobility for fast charging swappable battery project utilizing 19 ampere generation three packs. Projects like this present a large market opportunity for expansion due to their lower total cost of ownership.

This is just a sample of many projects in which we are involved and we expect to continue expanding our Blitz and market segment in 2025. Now, Ms. Kambabi will provide a more detailed overviews of our financial performance.

Thank you, Mr. Wu, and thank you, everyone, for tuning in.

I will now walk you through our financial performance. Please turn to Slide 13, where I will cover highlights from our full year and Q4 twenty twenty four results. We recorded revenue of 113,400,000.0 in Q4 twenty twenty four, compared to $104,600,000 in Q4 twenty twenty three, an 8% year over year increase. And as Mr. Wu mentioned earlier, a record fourth quarter for the company. On a full year basis, we achieved record revenue of $379,800,000 up 24% from $36,600,000.0 in 2023. Gross profit for Q4 twenty twenty four was 41,500,000.0 up from $23,000,000 in Q4 twenty twenty three an 80% improvement driven by operational efficiencies increased utilization and disciplined cost control implementation. This resulted in a gross margin of 36.6% compared to 22% in the prior year period. A 14.6 percentage point improvement. For the full year, gross profit was $119,600,000 more than double the prior year's $57,200,000 reflecting a 109% increase. Gross margin for the full year 2024 was 31.5%, up from 18.7% in 2023. A 12.8 percentage point improvement reflecting operating leverage and continued efficiency gains. Operating expenses were 43,200,000.0 in Q4 twenty twenty four compared to $46,000,000 in Q4 twenty twenty three. The largest contributor to the quarterly decrease was cost saving actions taken in the second half of the year in The U. S. And streamlining across all our global On a full year basis, operating expenses were 238,300,000.0 compared to $165,900,000 in 2023.

The increase was primarily driven by non cash impairment charge of 93,200,000.0 Our GAAP net loss for Q4 twenty twenty four was $82,300,000 compared to a net loss of $24,600,000 in Q4 twenty twenty three. GAAP net loss for the full year 2024 was $195,500,000 compared to a net loss of $106,400,000 in 2023. Now turning to non GAAP results. After adjusting for non cash settled share based compensation expense, or SBC and cost of sales adjusted gross profit was $41,600,000 in Q4 twenty twenty four compared to $24,600,000 in Q4 twenty twenty three. This equates to an adjusted gross margin of 36.7% in Q4 twenty twenty four, up 13.2 percentage points year over year. For the full year 2024, adjusted gross profit was 123,000,000 up from $63,300,000 in 2023. Adjusted gross margin for the full year 2024 was 32.4% compared to 20.7% in 2023 and eleven point seven percentage point improvement. After adjusting for non cash SBC expense in selling and marketing, general, administrative and research and development, adjusted operating expenses in Q4 twenty twenty four were $42,800,000 compared to $34,300,000 in Q4 twenty twenty three. After accounting for those adjustments, and changes in fair value of our convertible loan and associated warrants we reported adjusted net loss of $600,000 in Q4 twenty twenty four compared to an adjusted net loss of $11,400,000 in Q4 twenty twenty three.

Adjusted EBITDA was $8,600,000 in Q4 twenty twenty four, compared to a negative $2,600,000 in the prior year period. 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. Management also evaluated the company's ability continue as a growing concern. In prior periods, we disclosed this that substantial doubt as to our ability to continue as a going concern existed due to liquidity constraints and recurring operating losses.

However, with our operating results in the second half of twenty twenty four and stronger cash positioning, we have made meaningful progress towards financial sustainability Management believes that its operational initiatives are sufficient to enable the company to meet its obligations that initially raise substantial doubt about the company's ability to continue as a growing concern. Based on our current performance, available resources and expectations for the next twelve months, management has concluded that there is no substantial doubt about our ability continue as a going concern. Please turn to Slide 14 where we will review 2024 revenue by region. In EMEA, we achieved 123% year over year growth with revenue increasing to $187,700,000 in 2024 compared to $84,400,000 in 2023. Accounting for almost half of total revenue. This impressive growth was driven by strong commercial traction in Italy, Germany and other Western European markets, reflecting continued demand for high performance battery systems that meet stringent EU safety and performance standards. As the region accelerates its electrification goals, expect sustained growth. In The United States, revenues rose 360% year over year from $3,100,000 in 2023 to $14,400,000 in 2024, contributing 4% of our total revenue. This increase reflects the early adoption of our battery systems by commercial vehicle OEMs.

While The U. S. Remains a smaller revenue contributor for us, we are confident in its long term potential and that regional growth will remain high with meaningful revenue impact in 2025. In Asia Pacific, revenue declined from $219,100,000 in 2023 to $177,700,000 in 2024, a 19% year over year decrease. This decline is aligned with our strategic repositioning away from loan margin segments in China and India where price competition remains intense with lower priced LFP options. Our focus has shifted towards more profitable, higher value opportunities especially in regions that emphasize technology differentiation over commoditization. Now turning to slide 15, let me walk you through our cash flow performance for 2024. We generated positive operating cash flow of $2,800,000 a significant improvement compared to $75,300,000 outflow in 2023. This turnaround was primarily driven by non cash adjustments, helped offset our GAAP net loss.

These were primarily $93,200,000 in impairment charges dollars 80,000,000 in fair value adjustments related to our warrants and convertible loan, 30,800,000.0 in share based compensation and $30,100,000 in depreciation. Cash used in investing activities totaled $12,200,000 primarily from 27,700,000.0 in capital expenditures partially offset by $10,000,000 from asset disposals and $5,600,000 from maturing short term investments. From financing activities, we generated $37,600,000 in net cash, which included $101,500,000 in new bank borrowings and $25,000,000 from a convertible loan. Partially offset by $66,200,000 in repayments and $22,200,000 in deferred CapEx. Finally, after accounting for $6,800,000 foreign exchange loss, we ended the year with a net increase in cash of 21,400,000.0 bringing our total cash and cash equivalents and restricted cash to $109,600,000 as of year end. Positioning us with stronger financial flexibility heading into 2025 I will now turn it back to Mr. Wu to provide some visibility into outlook for the coming year and closing remarks.

Thank you. Please turn to Slide 17. We expect 2025 revenue to increase 18% to 25% year over year. This puts our revenue guidance in the range of $450,000,000 to $475,000,000 We also aim to maintain a gross margin target of 30%. For our APAC business, we continue to target production capacity improvements at our Huzhou facility to meet increasing customer demand. Our Phase 3.2 expansion is anticipated to come online later this year which is expected to give us up to two gigawatt hour of additional capacity across a variety of our high performance products. We are also making significant strides toward new and exciting products to add to our extensive product portfolio. We anticipate that our high growth EMEA business will continue to drive significant revenue increases. Year over year. And we are working to secure new strategic partners for both current upcoming products. For The Americas segment, we anticipate growing revenue and as a company regularly accesses its financing needs, and analyzes the options available to it.

To summarize, 2024 was a year of significant progress and a strategic realignment for Microvast. We achieved record revenues demonstrating the strong global demand for our high performance battery solutions. Particularly in EMEA region, we have significantly improved our gross margins and delivered a positive adjusted EBITDA in the second half of the year. Signaling a clear shift towards sustainable profitability. We have made substantial strides in technology innovation, with unveiling of our ME6 Energy Storage System and advancements in silicon based and all solid state battery technologies. While we navigate challenges, including a difficult financing environment, and localized market pressures. Our strategic cost cutting measures and focus on high demand market have positioned us for continued growth. Looking ahead to 2025, our priorities are clear. Achieving positive cash flow, maintaining strong gross margins, and expanding our market reach through continued innovation and strategic partnerships. We are confident in our ability to capitalize on the growing electrification trend and deliver long term value to our shareholders. Thank you all for attending another historical company quarterly update. We look forward to updating you on our results for the first quarter of twenty twenty five.

This is the conference operator. This concludes today's webcast. Thank you for joining Microvast's fourth quarter and full year 2024 earnings call. You may now disconnect.