Yahoo Finance

We are proud of our achievements last year and are looking forward to executing on the many opportunities ahead of us in 2023. Some of our most notable achievements last year include the establishment of the Microvast Energy Division in Colorado and is the introduction our new ESS container offering. This expands our addressable market to include energy storage in sector, where annual deployments in the U.S alone reached to 13.5 gigawatt hour in 2022 and our large 1.2 gigawatt hour utility scale project has been a big boost for our push into this market. In our commercial vehicle business, we expanded our partnership with IVECO, one of the largest commercial vehicle manufacturer in Europe, for a number of additional vehicle platforms and expect to ramp production and begin deliveries this year.

We were also selected for a $200 million grant by the U.S. Department of Energy to build our most advanced high-temperature separator plant in the United States to help enhance battery safety for the industry. And we continue to expand our industry leading technology. We introduced our 53.5 amp hour high energy cells and began initial shipments in the fourth quarter. We anticipated this solution to be a key driver of our growth in 2023 led by demand across commercial vehicle applications, including light commercial vehicles, electrical buses, or e-bus and commercial trucks as well as ESS. To meet this demand, we expanded our production capacity in Huzhou by adding a 40 automated 2 gigawatt hour cell module and a pipeline dedicated to the production of 53.5 amp hour battery products.

And our 2 gigawatt hour capacity expansion at our new U.S. facility in Crossville, Tennessee is in full construction mode with start of production targeted for Q4 this year. I would now like to turn the call over to our Chief Revenue Officer, Sascha Kelterborn, who will discuss some of our key wins and achievements in the quarter.

Sascha Kelterborn: Thank you, Mr. Wu. I would like to start by reviewing some of our key wins during the fourth quarter. Besides the already mentioned highlights from Mr. Wu, I would like to mention further on Slide 5 that Kalmar and Microvast have extended their supply and purchase agreement through 2026. We are proud to support Kalmar on their global electrification journey with our new Gen 4 packs. With our technology roadmap and deep understanding of Kalmar's heavy-duty business, we look forward to many more years of close cooperation. Please turn to Slide 6, which highlights some of our key awards in the commercial vehicle market. We have four major highlights to share that reflect the diversity nature of our presence in the market.

Starting with our ongoing strategic partnership with the French-based technology company, Gaussin, that offers one and on-road zero emission smart vehicles for freight transportation and people mobility. The Gaussin ATM, as an example, is a full electric yard tractor designed for deployment in distribution centers, logistic hubs, container depots and other industrial applications. It has a loading capacity of up to 38 tons. The ATM will be powered by Microvast high-tech Gen 4 battery packs. Thanks to our strategic cooperation with CNH Industrial, IVECO Group, our batteries are now powering their new prototype of the New Holland agriculture tractor, which will be produced starting late 2023. Our Gen 4 battery pack solution allows us for nonstop daily operations and can charge to 100% in 1 hour.

Then we have our battery supply agreement with REE Automotive, which is aiming to revolutionize the future of commercial vehicles with its innovative full electric skateboard platform. Our Gen 4 battery pack is designed to address the requirements of commercial vehicle fleets, which our partner, REE Automotive, is targeting. The newly deployed Gen 4 battery packs contain Microvast high-energy 53.5 amp hour pouch cells. The Gen 4 battery packs will meet cross-regional battery standards, such as ECE R100.3, GB 38031, and UL2580. Additionally, the outlook for ongoing business with our customer Dongfeng Trucks, China's leading truck brand, is very promising. Especially for the hybrid heavy duty truck segment, our new Gen 4 battery packs with 48 amp hour cells will play an important role.

Now please turn to Slide 7, which displays our major orders in Q4. We received a nearly $10 million order for a cargo handling application for MAFI & TREPEL, a German-based leading manufacturer of industrial trucks for the transport of heavy payloads, including for airports, seaports, logistics and distribution centers. We remain very active in India. Light medium commercial vehicle is predicated as the next frontier for the electrification in India due to the surging energy cost and propelled by the seed demand projections in mid-mile and last-mile transportation business. The Indian market will experience a doubling in light medium-duty vehicles sales within the next 15 years. Similar developments can be observed with e-buses, where the share of e-buses of the overall bus fleet, is expected to reach over 40% by 2040.

To reinforce our standing in the Indian market, Microvast has established strategic partnerships with two of the leading commercial vehicle manufacturers. Our customer, Switch with the e-bus and light commercial vehicle portfolio as well as JBM with the bus portfolio are well positioned to meet the growth. During the fourth quarter, we received an order in excess of $6 million from Switch, a subsidiary of Ashok Leyland, for an e-bus application in India where Microvast is an exclusive supplier. In addition, we are working with JBM Group to leverage further growth opportunities in the Indian e-bus sector, using our fast charging batteries, allowing for up to 300 kilometers daily commutes. Furthermore, we have the new battery supplier for the IVECO Crossway produced by IVECO Bus.

The new Crossway uses our industry-leading high energy density battery pack system, i-pack ranging from 400 to 466 kilowatt hours, accelerating its IVECO's transition to zero emissions. During the quarter, we also continued to benefit from ongoing orders from Ashok Leyland, IVECO Group, ZF, Shell and others. Our strategic partnership with IVECO Group continues to strengthen and we expect it to expand in 2023 and beyond. The IVECO eDaily is now available for the European market and has already won the One to Watch award, while IVECO Bus has issued multiple press releases announcing municipality tenders it has won using Microvast battery solutions. For €˜23, in addition to delivering on these projects with IVECO, we are looking to grow our business with them across other vehicle platforms and projects.

We have multiple initiatives to further grow our commercial vehicle business in the U.S. For example, we are in the process of finalizing a strategic partnership with a proven market-leading specialty OEM. Our high-power, long-life high charge rate battery technology is a perfect fit for mining applications. We see tremendous opportunities in the segment and are currently executing our recently announced technical partnership with a consortia led by Shell to support the decarbonization of the mining industry. We will provide high-powered battery solutions with ultra-fast charging capabilities in support of a modular truck being designed for the mining industry. Production deliveries are expected in 2025. In the Commercial Truck segment, we have an exciting partnership in the works with a leading global truck manufacturer for a medium-duty application in the U.S. Testing is expected to be completed this summer and the formal customer commitment is anticipated later this year.

As we noted over the last few quarters, raw material prices remain at elevated levels as a result of supply chain disruptions as well as worldwide inflation. Our unit cost across the Board continued to track significantly higher than we anticipated at the beginning of last year. In the second half of 2022, we implemented mitigation strategies, including optimization, longer term supply contracts, identifying new and/or additional sources of supply and increasing our selling prices wherever possible. However, we continue to expect raw material prices, especially for certain key materials like lithium to be volatile through the end of 2023 and possibly all the way in 2024. Over the course of 2023, we expect our order volume to increase meaningfully as we ramp up our new manufacturing capacity in Huzhou securing additional ESS wins and bring new manufacturing capacity online in Clarksville.

I will turn the call over to Craig to review our financial performance.

Photo by Kumpan Electric on Unsplash

Craig Webster: Thank you, Sascha. I will spend the next few minutes discussing our Q4 2022 financial results. Please turn to Slide 9. I will summarize the mainline items from our Q4 P&L. We recorded revenue of $64.8 million in Q4 2022, which was down slightly from $66.8 million in Q4 2021. The year-over-year decrease was due to a delayed order shipment that we will recognize in Q1 2023, along with currency headwinds. On a full year basis, despite facing continued challenges from COVID lockdowns in China and dealing with high infection rates in our Huzhou facility as China's zero-code policy was abandoned, we achieved revenue of $204.5 million, up 35% from $152 million in the prior 12-month period. We posted gross profit of $2.2 million in Q4 2022 compared to gross profit of $1.2 million in the prior period, a 93% improvement.

On a full year basis, our gross profit was $9.1 million compared to a gross loss of $42.7 million for the prior year, a 121% improvement against the prior year. In Q4 2021, we provided for higher warranty cost associated with the legacy product, which was not repeated in Q4 2022. Our gross margin for full year 2022 was 4%, whereas in the prior year, it was negative 28%. Operating expenses were $37.3 million in Q4 2022 compared to $52.2 million in Q4 2021. The largest contributor to the decrease in operating expenses was a decline in our share-based compensation expense, which totaled $16 million in the quarter compared to $22.6 million in Q4 2021. As mentioned previously, non-cash share-based expenses were a large contributor to the increase in GAAP operating expenses and operating loss.

Full year 2022 operating expenses were $170.7 million compared to $157.4 million in the prior year, an 8% increase. GAAP net loss was $33.7 million in Q4 2022 compared to net loss of $46.6 million in Q4 2021. GAAP net loss for full year 2022 was $158.2 million compared to a net loss of $206.5 million in full year 2021. We believe a more accurate representation of our financial performance, especially as it relates to cash operating expenses and operating loss is as illustrated in Slide 10. After adjusting for non-cash settled share-based compensation expense in our cost of sales, adjusted gross profit was $4.2 million in Q4 2022, compared to adjusted gross profit of $3.1 million in Q4 2021. This translates into an adjusted gross margin of 6.4% in Q4 2022 compared to 4.7% in Q4 2021, a 1.7 percentage point improvement.

We were pleased to see another quarter of gross margin improvement despite higher raw material prices. This demonstrates our continuous efforts throughout the year to improve our long-term gross margin. When making the same adjustments for full year 2022, our adjusted gross profit was $16.8 million compared to adjusted gross loss of $38.5 million in full year 2021. This translates into an adjusted gross margin of 8.2% in full year 2022 compared to a negative 25.3% in full year 2021, a 33.5 percentage point improvement. After adjusting for non-cash SBC expense in SG&A, our adjusted operating expense in Q4 2022 was $21.4 million compared to $39.6 million in Q4 2021. When making the same adjustment for full year 2022, our adjusted operating expense was $96.5 million compared to $97.6 million for full year 2021.

After making those non-cash SBC expense adjustments and accounting for changes in fair value of our warrant liability and convertible notes, adjusted net loss was $15.9 million in Q4 2022 compared to $33.4 million in Q4 2021. On a full year basis, adjusted net loss was $77.3 million in full year 2022 compared to $135 million in full year 2021. Reconciliations of these non-GAAP metrics to the most comparable GAAP metrics are included in the table at the end of our earnings press release. Slide 11 shows the geographic breakdown of our revenue for the 12 months ended December 31, 2022, compared to the prior year period. As you can see, our two largest markets were Asia Pacific and China, growing 38% and 42%, respectively, year-over-year. Revenue in our European business declined 19% for the 12-month period ended in 2022 compared to the prior year period, mainly due to the delayed start of customer projects.

However, we expect sales in the region to see a strong rebound in 2023 as these projects begin to ramp up. We are pleased to note that a good percentage of our backlog is from European customers who are launching the electrified models for the first time and should achieve year-over-year volume improvements using our technology, especially the 53.5 amp hour cell. Revenue in our U.S. region for full year 2022 posted a strong 298% growth rate compared to full year 2021. We have very high expectations for U.S. revenue growth in 2023 and beyond and are ideally positioned to meet the opportunities in the U.S. market from our facility. The award of the 1.2 gigawatt hour ESS contract, one of the largest of its kind in the U.S. to-date, has accelerated our business plan for Microvast Energy.

That project is utilizing our ME-4300 container solution with the 53.5 amp hour cell, allowing each container to deliver 4.3 megawatt hours of energy. With that energy density, we estimate that our battery solution allows for 30% fewer containers relative to those from competitors. This gives the developed a smaller construction footprint costs, easier and faster installation and reduced maintenance with far fuel containers to maintain over the life of the project. Additionally, the ambition retention performance of our cell far outperformed those of other suppliers. Given the clear performance benefits of our ESS container, the utility-scale energy market in the U.S. is a huge opportunity for us. By 2030 its estimated 396 gigawatt hours of energy storage capacity will be added in the U.S. alone, with around 70% of it being projected for energy shifting application.

I will now take you through our funding position and other significant metrics from our 2022 financial performance, as you will see on Slide 12. We ended the year with a cash position of $327.7 million comprised of cash, cash equivalents, restricted cash and a short-term investment. We never banked with Silicon Valley Bank and have no exposures as a result of its collapse. Our cash position gives us a very strong balance sheet to execute our 2023 plan, especially our 4-gigawatt hour of capacity expansion, which will come into production given as an additional $1 billion of revenue potential. We also closed the year with a very healthy backlog of $410.5 million, which is our highest total today. This underpins our conviction that 2023 will be the start of many high-growth years for Microvast.

Our high-energy 53.5 amp hour makes up over 80% of its backlog, and we expect to realize margin improvements as we further scale this technology. U.S. and European projects account for approximately 90% of our backlog, and we will see a much more even distribution of our revenue by region in 2023 compared to 2022. Although Asia Pacific and China only currently account for approximately 10% of our backlog, these regions were $185 million business for us in 2022, and we expect the lease regions to have another strong year in 2023. Moving on. Capital investments we made in 2022 totaled $128.7 million and were predominantly utilized to bring the additional 4-gigawatt hours of capacity online that I just mentioned. We estimate that capital expenditure for the first quarter will be in the range of $50 million to $75 million and will primarily be used for milestone payments on completion of our Huzhou expansion, ongoing construction of Clarksville and our upcoming plans to use Mexico as an ESS container assembly hub.

We will provide more details on this Mexico project in our Q1 update. As we mentioned previously, we fully expect Clarksville to be a direct beneficiary of Section 45 IRA credit. It should also qualify as domestic content for all of our U.S. customers. Looking ahead, we see 2023 as a standout year, which we will be able to demonstrate tangible and material results in the R&D initiatives and capital investments we made in prior years. With that, I will turn it back over to Mr. Wu to review our outlook.

Yang Wu: Thanks, Craig. Please turn to Slide 14. Based on strong visibility from our backlog position, along with positive industry tailwinds pushing electrification forward in our key markets, we expect to achieve very strong year-over-year revenue growth in 2023 of 65% to 75%, our total revenue in the range of $336 million to $358 million. As Craig just mentioned, our backlog is mostly composed of orders from customers in Europe and in the United States and is driven by our introduction of 53.5 amp hour high-energy cell. announced 1.2-gigawatt hour ESS project and the ramp-up of multiple commercial vehicle projects in Europe. In the first quarter, we expect to begin deliveries of our 53.5 amp hour cell from our new fully automated line in Huzhou.

In the second half of the year, we anticipate starting deliveries of our ESS containers from our Mexico assembly plant. And in Q4, we expect to have an additional 2-gigawatt hour, capacity up and running at our Clarksville plant on the fully automatic production lines dedicated to the 53.5-amp hour cell. As a result, we anticipate closing out 2023 with 7-gigawatt hour total production capacity, including 4-gigawatt hour dedicated to the manufacture of our new 53.5 amp hour high-energy cell. We expect to add a significant track over the course of 2023 with orders from our commercial vehicles and ESS customers. Once our 2-gigawatt hour Clarksville expansion is up and running, we will begin to realize the benefits of IRA, which equated to $45 per kilowatt hour on all cells and the modules produced.

On 2-gigawatt hour of production, that has a potential of $90 million per year in IRA credits. We will also progress our separator business in 2023, and by the end of this year, anticipated having a 10 million square meter production line for our polyaramid separator operation. In parallel, we will also be working towards its full-scale operation in the United States starting in 2025. All of those initiatives position us well for continued strong revenue growth over the coming years, which we believe will enable us to achieve profitability in the next 2 to 3 years. I'd like to finish by saying that at the start of 2023, this is the strongest position that my company has been in. We believe that the market has finally caught up with our technologies.

Customers have been testing the 53.5 amp hour cells since 2021, and we started to receive multiyear orders later that year. We then started to initiate our capital investments to meet the demand, and those will be finished this year. All the foundations are now in place to see the large-scale industrialization of our technologies, which puts us in a very strong competitive position as we enter our multiyear high growth phase. With that, I would now like to turn the call over to your questions. Operator, please provide instructions for the Q&A session.

See also 11 Best Cryptocurrencies to Invest In for Beginners and 15 Countries with Highest Inflation Rates.

To continue reading the Q&A session, please click here.