Microvast (NASDAQ: MVST), a leader in the design, development, and manufacturing of next-generation battery technology for electric vehicles, has reported a substantial year-over-year revenue increase of 73% for the first quarter of 2024, with sales reaching $81.4 million.
The company's growth has been attributed to a significant demand increase in the Asia-Pacific (APAC) and Europe, the Middle East, and Africa (EMEA) regions. Microvast's CEO, Yang Wu, and Interim CFO, Nancy Smith, provided insights into the company's financials and operational updates during the earnings call, along with an optimistic outlook for the second quarter of 2024.
Key Takeaways
- Microvast's Q1 2024 revenue surged to $81.4 million, a 73% increase from the previous year.
- The company's gross margin improved to 21.2%, with adjusted gross margin reaching 22.6%.
- Substantial sales increases were seen in APAC (640%) and EMEA (184%) markets.
- The company ended Q1 with a strong backlog of $348.3 million.
- Microvast anticipates Q2 revenue to be between $90 million and $98 million, a 25% increase at the midpoint from the previous year.
- Operational efficiency and a growth margin target of 20% to 25% are key focus areas.
Company Outlook
- Q2 revenue expected in the range of $90 million to $98 million, marking a 25% increase year-over-year at the midpoint.
- Targeting operational efficiencies and maintaining a growth margin range of 20% to 25%.
- Plans to deliver new battery cell technology (48-amp-hour and 53.5-amp-hour) from the Huzhou facility.
- Anticipated revenue growth in EMEA to more than double year-over-year in Q2 2024.
- Expansion into additional commercial vehicle projects and focus on securing Clarksville financing.
Bearish Highlights
- The company faces challenges, including market sentiment towards the cleantech industry and U.S. financing hurdles.
- GAAP net loss was $24.8 million for Q1 2024, although this was an improvement from the net loss of $29.6 million in Q1 2023.
Bullish Highlights
- Record first-quarter revenue and significant year-over-year growth in key markets.
- The company is expanding its commercial vehicle footprint in America and Europe.
- New customer engagements in the U.S. specialty vehicle market and European e-trailer market.
Misses
- Despite revenue growth, the company reported an adjusted net loss of $13 million in Q1 2024, compared to an adjusted net loss of $11.7 million in Q1 2023.
Q&A Highlights
- No Q&A session highlights were provided in the summary.
Microvast's positive performance in Q1 2024 is a testament to the company's expanding global footprint and its ability to secure new customers and projects. With an optimistic outlook for Q2 and a strategic focus on operational efficiency, Microvast is poised to continue its growth trajectory in the electric vehicle battery market.
Investors and stakeholders will be watching closely as the company works to overcome financing challenges and capitalize on the burgeoning demand for clean technology solutions.
InvestingPro Insights
Microvast's recent earnings report shows a company that's rapidly growing its top line, with a particularly strong performance in the APAC and EMEA regions. This growth is also reflected in the company's substantial year-over-year revenue increase as reported in the first quarter of 2024. Still, it is important for investors to consider various other financial metrics and indicators to get a fuller picture of the company's financial health and future prospects.
InvestingPro Data indicates a challenging financial landscape for Microvast. The company's market capitalization stands at $134.06 million, which suggests that it is still relatively small in size compared to some of its peers in the industry.
The Price / Book ratio as of the last twelve months ending Q4 2023 is 0.25, which could be seen as an indicator that the stock is trading at a low valuation relative to the company's book value. This could potentially attract value-oriented investors, but it is also important to note that this low multiple may reflect underlying concerns about the company's assets and future profitability.
In terms of profitability, Microvast's Price to Earnings (P/E) ratio is -1.22, with an adjusted P/E ratio for the same period of -1.34. Negative P/E ratios are typically indicative of a lack of profitability, and this is consistent with the company's reported net losses. The negative P/E ratio underscores the fact that the company is not currently making a profit, which is a critical consideration for potential investors.
InvestingPro Tips shed light on some of the risks associated with investing in Microvast. The company operates with a significant debt burden and may have trouble making interest payments on its debt, which is a serious concern for long-term viability. Moreover, Microvast is quickly burning through cash, which may impact its ability to sustain operations without securing additional financing or improving cash flow.
Despite these concerns, Microvast has seen a significant return over the last week, with a 13.52% price total return, indicating some investor optimism or positive market reactions to recent news or events.
Investors interested in a deeper analysis of Microvast can find additional InvestingPro Tips that provide more detailed insights into the company's financial health and stock performance. Currently, there are 17 additional tips available on InvestingPro, which can be accessed at: https://www.investing.com/pro/MVST. For those looking to subscribe, remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Microvast's future success will hinge on its ability to manage its debt, conserve cash, and continue to drive revenue growth. As the company navigates these challenges, investors will need to keep a close eye on both the risks and opportunities that lie ahead.
Full transcript - Microvast Holdings Inc (NASDAQ:MVST) Q1 2024:
Unidentified Company Representative: Thank you, Operator, and thank you everyone for joining us today. With me on today’s call are Mr. Yang Wu, Founder, Chairman and CEO; and Ms. Nancy Smith, Interim CFO. Mr. Wu will start off with a high level overview of the quarter before providing some operational updates. Ms. Smith will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our second quarter 2024 outlook. Ahead of this call, Microvast issued its first 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 of the company website to go along with management’s prepared remarks. As a reminder, please note that statements made during this call are forward-looking 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 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 the Microvast website. And 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 3 as I cover a few highlights from the first quarter. The business posted record first quarter revenue with 73% growth year-over-year in Q1 2024. Delivering revenue of $81.4 million. We achieved this growth while maintaining a growth margin of 21.2%, a 10.9%-point improvement year-over-year. This incredible growth comes largely from sales increases in our APAC and EMEA businesses year-over-year. We saw triple-digit age growth in both regions, 640% and 184% for IPAC and EMEA, respectively. Please join me on Slide 5. The company was successful in expanding its commercial vehicle footprint with additional customers and projects in America and Europe alike. We have begun to tap into the Canadian market and are working with American LCV OEM for ramp-up expected in the second quarter. We closed the first quarter with a backlog of $348.3 million and continue to strive for operational efficiency. The company posted significant improvements to adjusted gross margin at 22.6%, a 9.1-percentage-point increase year-over-year. The company posted yet another banner quarter and we expect continued growth and successes. So this also came with challenges. In addition to the current market sentiment facing the cleantech industry, we continue to navigate U.S. financing hurdles. Turning to Slide 6, we have some exciting new customers in the United States specialty vehicle market and European e-trailer market. These customers will utilize Gen 4 packs with our 53.5-amp-hour cell technology. While we aren’t quite ready to announce the projects publicly, we have made significant progress with the customers on product ramp-up and the prototype development. Additionally, we are excited to be working with German OEM engineers on the prototype fuel cell truck that will be bought at IAA 2024. I would now like to turn the call over to Mrs. Smith to discuss our financials in more detail.
Nancy Smith: Thank you, Mr. Wu, and thank you everyone for joining in. I’ll spend the next few minutes discussing our quarter one 2024 financial results. Please turn to Slide 8 and I will summarize the main line items from our Q1 P&L. We booked a record first quarter with quarter one revenue of $81.4 million, an increase of 73% from $47 million in quarter one 2023. This growth was driven primarily by strong sales demand at both our APAC and EMEA markets for commercial vehicles as OEMs continue to adopt our technology. Our gross margin improved to 21.2% in quarter one 2024, compared to 10.3% in quarter one 2023. After adjusting for non-cash settled share based compensation expense in our cost of sales, adjusted gross margin increased to 22.6% in quarter one 2024, compared to 13.5% in quarter one 2023. That’s a 9.1-percentage-point improvement. Operating expenses were $40.9 million in quarter one 2024, compared to $36.2 million in quarter one 2023, an increase of 13% from the prior year period. After adjusting for non-cash SBC expense in SG&A, our adjusted operating expenses in quarter one 2024 were $30.1 million, compared to $19.8 million in quarter one 2023, an increase of $10.3 million. This is mainly due to increasing headcount costs. GAAP net loss was $24.8 million in quarter one 2024, compared to net loss of $29.6 million in quarter one 2023. After adjusting for non-cash SBC expense and changes in fair value of our warrant liability, adjusted net loss was $13 million in quarter one 2024, compared to an adjusted net loss of $11.7 million in quarter one 2023. The impact of these adjustments is shown in Slide 9 and 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. Slide 10 shows the geographic breakdown of our revenue for quarter one 2024 compared to the prior year period. As you can see, we booked outstanding sales increases. APAC sales were up 640% year-over-year and accounted for 29% of our revenue, up from just 7% a year ago. Our EMEA business was up by 184% year-over-year and accounted for 36% of our revenue, up from just 22% a year ago as key customers begin their vehicle ramp up. And with that, I’ll turn it back over to Mr. Wu to briefly go over our outlook for the second quarter. Thank you.
Yang Wu: Thank you. Please turn to Slide 12, which provided a summary outlook for the upcoming months. For the second quarter, we expect the revenue to be in the range of $90 million to $98 million, up 25% from Q2 a year ago at the midpoint. This anticipated growth is primarily 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 margins to be in the range of 20% to 25%. For APAC, we will be delivering 48-amp-hour and 53.5-amp-hour sales from our Huzhou facility. We plan to do this while also targeting growth in Southeast Asia and continuing R&D progress on the new upcoming products. In EMEA, we anticipate a Q2 2024 revenue to grow more than double year-over-year. Expect to deliver new prototypes to customers and plan to expand into additional commercial vehicle projects. For the Americas, we continue to focus on securing our Clarksville financing while remaining committed to fulfilling planned customers and revenue growth. We also continue exploring additional customer sales opportunities, including within the Canadian CV market. Thank you all for joining us today. We look forward to updating you on our progress again next quarter.
Q -:
Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for joining and you may now disconnect your lines.
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