Microvast Holdings, Inc. Q4 FY2023 earnings call

• Full year 2023 saw record revenue of $306.6M, driven by EMEA, APAC, and China growth. Gross margin improved to 18.7% from 4.4% prior year. - Huzhou 3.1 expansion completed in 2023, delivering qualified products from fully automated line. - Q4 2023 had $104.6M revenue, 61% Y/Y growth, adjusted gross margin 23.5%. Commercial vehicle business expanded with OEMs. - APAC operations: $290M revenue in 2023, 18% Y/Y growth, expecting profitability with Huzhou Phases delivering products in 2024. - EMEA operations: Revenue up over 434% Y/Y in 2023, targeting regional breakeven in 2024 with new customer wins. - U.S. operations: Challenging financing environment, Clarksville Phase 1A on hold until financing secured, with reduced OpEx and CapEx spend in 2024.

Full year 2023: Broke record revenue of $306.6 million. Driven by EMEA (434% Y/Y revenue growth), APAC and China with double-digit growth. Overall top-line up 50% Y/Y, gross margin increased to 18.7% from 4.4% prior year. Q4 2023: Highest revenue quarter at $104.6 million, up 61% Y/Y, adjusted gross margin 23.5%. APAC revenue in 2023 was $290 million, 18% Y/Y growth. EMEA revenue in 2023 up over 434% Y/Y.

• Q1 2024 revenue expected to increase 40%-60% Y/Y, range $65M-$75M, aiming to maintain gross margin 20%-25%. - APAC: All Huzhou Phases to deliver qualified products in 2024, target increasing utilization and regional profitability. - EMEA: Continue meaningful revenue growth and target regional breakeven in 2024. - U.S.: Reduce OpEx and CapEx spend until Clarksville financing secured, then target rapid growth once facility online.

• Challenging financing environment. - Reduced energy storage contract through mutual resolution. - Negative market sentiment in the sector and for rapid growth companies. - Lack of funding in the U.S. raises substantial doubt about continuing as a going concern.

Q: Can you talk a little bit about the overall quantum of capital that you're going to need, to secure to get Clarksville back on track? And then also, how we should think about the moderation in OpEx in the U.S. and how that impacts the overall company OpEx run rate?

A: As indicated, about $150M needed for Clarksville, majority for equipment and installation. OpEx in U.S. is moderated as financing for Clarksville isn't closed yet, with regional focus on China and Europe which are self-funded and profitable.

Q: Walk us through expectations for 2024, on kind of like operating cash flow? Like you highlight that you're trying to run Asia and Europe, kind of break-even or above break-even, just kind of trying to get the expectations on op cash flow for this year, and then just updated CapEx figures.

A: APAC had consistent profitability in 2023 and expects to continue in 2024. EMEA close to break-even with decent growth. CapEx in U.S. contingent on financing, around $150M for Clarksville Phase 1A; China Phase 3.2 on hold currently.

Q: On gross margin, guidance 20%, 25%, really good number there. Curious what's driving that. Can you talk a bit about who's your utilization today and kind of where that's going to move throughout the year?

A: Gross margin expansion due to higher sales, better raw materials pricing, and good yields across phases. Expect good utilization on all lines in 2024, aiming to hold gross margin at 20%-25% this year.