Microvast (MVST) - 2024 Q2 - Quarterly Report

Revenue and Sales Performance - Revenue for the three months ended June 30, 2024, increased by $8.7 million to$ 83.7 million, a 12% increase compared to the same period in 2023[138]. - Revenues increased from approximately $121.9 million for the six months ended June 30, 2023, to approximately$ 165.0 million for the same period in 2024, representing a growth of 35.3%[171]. - Sales volume increased from approximately 270.2 MWh for the three months ended June 30, 2023 to approximately 301.7 MWh for the same period in 2024[172]. - Revenues increased from approximately $121.9 million for the six months ended June 30, 2023, to approximately$ 165.0 million for the same period in 2024, driven by a sales volume increase from approximately 402.8 MWh to approximately 654.9 MWh[179]. Financial Performance - Gross profit for the six months ended June 30, 2024 was approximately $44.4 million, up 172.2% from$ 16.3 million in the same period of 2023, with gross margin improving from 13.4% to 26.9%[171]. - Gross margin improved from 13.4% for the six months ended June 30, 2023, to 26.9% for the same period in 2024, attributed to better economies of scale and lower raw material prices[180]. - Operating loss for the six months ended June 30, 2024 was approximately $98.7 million, an increase of 69.8% compared to a loss of$ 58.2 million in the same period of 2023[171]. - The company recorded a loss of $1.6 million for the three months ended June 30, 2024, mainly due to the change in fair value of a convertible loan with a shareholder[175]. - Cash generated from operating activities was$ 2.1 million for the six months ended June 30, 2024, compared to a cash outflow of $41.0 million in the same period of 2023[201]. Cost Management - Cost of revenues decreased by$ 15.0 million, or 14.2%, for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to lower raw material prices[171]. - General and Administrative expenses rose by $3.4 million, or 7.8%, for the six months ended June 30, 2024, primarily due to increased personnel-related expenses and professional fees[183]. - Selling and marketing expenses remained stable for the three months ended June 30, 2024 compared to the same period in 2023[174]. - Research and development expenses for the three months ended June 30, 2024 were stable compared to the same period in 2023, indicating continued investment in new product development[174]. Capacity and Production - As of June 30, 2024, the order backlog for electric vehicle battery systems was approximately$ 278.6 million, equivalent to about 1,257.1 MWh, with over 63% attributable to Europe and the U.S.[138]. - The company completed a 2 GWh capacity expansion for its 53.5Ah cell technology in Huzhou, China, which is now operational and generating revenue[151]. - The company has made significant investments in capacity expansions in both Huzhou, China, and Tennessee, U.S., to meet anticipated demand[151]. - The company plans to shift production from 53.5Ah cells to lithium iron phosphate (LFP) cells at its Tennessee facility, citing better suitability for energy storage solutions[140]. Strategic Initiatives - The company aims to become a leading global provider of energy storage solutions, emphasizing the importance of green energy for electric vehicles[139]. - LFP batteries are expected to be 20-40% less expensive per kilowatt-hour compared to NMC batteries, enhancing their economic viability for energy storage applications[141]. - The company has expanded its R&D footprint in Orlando with a 75,000 square foot facility to enhance technology and product innovation[149]. Impairment and Financial Risks - Impairment loss of long-lived assets was $64.9 million for the three months ended June 30, 2024, primarily due to a strategic shift towards LFP technology in the U.S.[174]. - The company recorded an impairment loss of long-lived assets amounting to$ 64.9 million for the six months ended June 30, 2024[208]. - A pause in the construction of the battery plant in Tennessee was decided until additional funding is secured[208]. - The company faces substantial doubt about its ability to continue as a going concern for at least one year from the date of the financial statements due to liquidity uncertainties[146]. Cash Flow and Financing - Cash used in investing activities totaled $7.4 million for the six months ended June 30, 2024, primarily for capital expenditures related to manufacturing facility expansions[204]. - Cash generated from financing activities was$ 28.5 million for the six months ended June 30, 2024, resulting from bank borrowings and convertible loans[205]. - As of June 30, 2024, the company had bank borrowings of $94.2 million, with interest rates ranging from 3.30% to 4.85% per annum[194]. - The company reduced the number of employees in the U.S. by 82% during the quarter ended June 30, 2024, significantly lowering operating expenditures[190]. Risk Management - An immediate 10% adverse change in foreign exchange rates would result in a foreign currency loss of$ 13.4 million on Renminbi-denominated accounts as of June 30, 2024[211]. - A hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would lead to an increase in the allowance for credit losses of approximately $0.6 million as of June 30, 2024[212]. - The company closely monitors overdue debts to minimize credit risk and has a team responsible for credit limits and approvals[213]. - The company evaluates long-lived assets for impairment whenever events indicate that the assets might be impaired[207]. Market Trends - The company has historically experienced higher sales during the third and fourth fiscal quarters compared to the first and second quarters[214]. - The company’s project finance loans in China are exposed to movements in the Loan Prime Rate, with a spread of 115 basis points[209]. - The company’s estimates and assumptions regarding financial statements are based on historical experience and may differ from actual results[206].