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spk01: Thank you for standing by. This is the conference operator. Welcome to the MicroVEST third quarter 2023 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, investment community professionals have the opportunity to participate in a question and answer session. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Rodney Werden, Microwasks' Director of Investor Relations. Please go ahead.
spk02: Rodney Werden 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, Mr. Zach Ward, President, and Mr. Craig Webster, Chief Financial Officer. Ahead of this call, Microbats issued its third quarter 2023 earnings press release, which can be found on the investor relations section of our website at ir.microbats.com. In addition, we have posted a slide presentation to accompany management's prepared remarks. As a reminder, please note that we will be making forward-looking statements on this call. These statements are based They should not be relied upon as representative of use for subsequent dates, and we undertake no obligation to revise or publicly release the results of any revision to these four living statements in light of any new information or future events. These statements are subject to a variety of risk and uncertainty that could cause the actual results to differ materially from expectations. For further discussion of the material risk and other important factors, of the SEC, including our annual report on Form 10-K, filed on March 16, 2023, and the 10-Q filed earlier today. In addition, during today's call, we may discuss non-GAAP financial measures, including adjusted gross profit, adjusted net loss, and adjusted EBITDA, which we believe are useful as supplemental measures of micro-VAS performance. These non-GAAP measures should be considered in addition and not as a substitute for or an isolation from GAAP results. These non-GAAP measures have been reconciled to their most comparable GAAP metric in the tables included at the end of our press release. A webcast of this call will also be available on the Investor Relations section of our company website. And with that, I will turn the call over to Mr. Wu for opening remarks.
spk03: Thank you. And thank you everyone for joining in on today's call. I would like to start off with a high-level overview of the quarter. Before providing some operational highlights, I will then turn the call over to Zach Ward, our president, who will discuss additional operational updates and some of our key successes for the quarter, followed by Craig Webster, our chief financial officer, who will discuss our financials in more detail. I will then address our outlook for Q4 and the full year 2023 before opening to the call after questions. Please turn to slide four as I cover a few highlights for the subquarter. We posted a 107% revenue growth year over year in Q3 2023. Delivery revenue of 80.1 million. This exceptional increase comes from incredible demand growth for our commercial vehicle business from customers in both Europe and Asia Pacific. We continue to expand our gross margins, achieving significant double-digit improvements and adjusted gross margin of 24.2%. A 14 percentage point increase year over year. We closed the third quarter with a record backlog of 678.7 million, driving by a strong order intake of 67.5 million from our commercial vehicle business. Our current backlog is made up of more than 84% 53.5 amp hour sale. driving by strong demand in both U.S. and European markets. The backlog continues to display how our 53-point amp hour technology is being readily integrated into both the energy storage and commercial vehicle segments worldwide. Turn to slide five. One of our most significant operational achievements in Q3 was the rapid commercialization of our 53.5 ampere cell from the new Huzhou phase 3.1 expansion. We are producing and delivering qualified products at more than a 70% utilization with an updated year end target of at least 90%. Additionally, our yields have surpassed our ranked production targets, and we will continue to focus on improvements to push even beyond this target level. I would like to provide an exciting update regarding our HUSU facility capacity. As you will see from slide six, we plan on an expansion of one gigawatt hour with an automated flexible production line. This line will be able to produce both our 53.5 amp hour cells as well as our 48 amp hour high power cells that are needed by our growing customers based on hydrogen fuel cell OEMs. This new line already has funding in place, requires a minimal incremental investment. and provide us a substantial capacity increase in order to meet our highest sales demand. I would now like to turn the call over to our president, Zach Ward, who will discuss some of our key operational updates, sales, partnerships, and achievements for the quarter. Thank you, Mr. Wu, and thank you all for joining us today. Now please turn to slide seven as I cover additional updates from the third quarter. To begin, I'd like to share the latest developments on our US operations for Clarksville Phase 1A. We're approaching domestic operations with a determined and proactive mindset. Our goal is to ensure a seamless ramp up for our US operations. To achieve this, We have extended factor acceptance tests for various components of the production line, incorporating those lessons learned and improvements from our HUSHO 3.1 line. While this has led to a slight delay in SOP, it sets the stage for an accelerated ramp up after installation. On the construction side, we are nearly at completion with a majority of the building now under joint occupancy and only minor work remains to be done in the fourth quarter. We're also in good position with our production equipment. We're using the same equipment that is now running with great success on our who show 3.1 line. We have approximately 30% of the equipment on site and Clarksville with majority of the remaining equipment having already been shipped. We have set our sights on 2024 with targets to deliver qualified sales and generate Section 45X IRA credits from the second quarter of 2024 onwards. Drawing on our commercialization success in Hoosier, we have set the ambitious goal of achieving target production yields for Clarksville in the second quarter. On the personnel side of things, we're continually enhancing our US workforce with better specific expertise and skills to support launch efforts. Our US headcount has increased by nearly 350% year over year as we move towards bolstering our domestic presence in 2024. Additionally, we're pleased to share that almost one third of our exceptional Clarksville team is made up of US veterans. Expect more updates regarding our U.S. operations in the future. In the meantime, I'd like to provide a brief update regarding our Windsor, Colorado Energy Storage Assembly Facility. The facility has successfully produced the first of our ME4300 energy storage containers and has completed a successful customer factory acceptance test. Now let's turn our attention to sliding. Despite facing challenges such as customer project delays, we achieved an order intake of 67.5 million and continued our year-over-year upward trajectory in revenue growth. Moving on to slide 9 to discuss some of our major project developments, we are excited to announce our collaboration on a prototype e-bus with OEM AutoCar, which will utilize our 53.5-amp-hour Gen 4 pack. AutoCar is a leading Turkish company renowned for producing buses, military vehicles, and industrial products. Microbats has also extended its partnership with RE Automotive to equip their LCD platform with our 53.5 amp hour Gen 4 pack. RE is a cutting edge next gen EV automotive technology company offering modular electric trucks and platforms.
spk02: In the quarter, we made deliveries of our 53.5 amp hour Gen 4 pack to South Korea in partnership with Hyger Bus for their eBus platform.
spk03: Hyger is a major player in the bus export industry with units in more than 100 countries and territories across Southeast Asia, Middle East, Africa, East Europe, and the Americas. Furthermore, we signed a general purchase agreement for our 21 amp hour Gen 3 pack with JVM Group, the leading Indian bus OEM. We're very pleased to report that we've delivered approximately 100 megawatt hours to JVM Group during the quarter. We have another excellent quarter in expanding our EMA business. Looking ahead to the quarter, we anticipate adding significant multi-year contracts as illustrated in slide 10. Both of these multi-year projects utilize the 53.5 amp hour cell, which we have previously mentioned is the linchpin of our multi-year high growth phase. We expect to finalize these contracts in Q4, at which point they'll be included in our backlog. I will now hand the reins over to our Chief Financial Officer, Craig Webster, to delve into our financial performance in the quarter. Thank you, Zach, and thank you, everyone, for tuning in. I'll spend the next few minutes discussing our Q3 2023 financial results. Please turn to slide 12, and I will summarize the main line items from our Q3 P&L. We recorded a really solid quarter with Q3 revenue of $80.1 million, an increase of 107% from $38.6 million in Q3 2022. This growth was driven primarily by strong sales demand in both our European and Asia-Pacific markets for commercial vehicles, as OEMs continue to increase their vehicle ramps. On a year-to-date basis, revenue was $202 million, up 45% from $139.7 million in the prior year nine-month period. Our gross margin improved to 22.3% in Q3 2023, compared to 5.2% in Q3 2022. After adjusting for non-cash-level share-based compensation expense in cost of sales, adjusted gross margin increased to 24.2% in Q3 2023, compared to 10.2% in Q3 2022. That's a 14 percentage point improvement. With the continuous yield and utilization improvement on the Phase 3.1 line, we expect to maintain and possibly improve these margin levels. Operating expenses were $44.7 million in Q3 2023 compared to $39.6 million in Q3 2022. a decrease of 10% from $133.4 million in the prior year nine-month period. After adjusting for non-cash SBC expense in SG&A, our adjusted operating expenses in Q3 2023 were $30.3 million compared to $22.3 million in Q3 2022, an increase of $8 million. This is mainly due to increasing headcount costs and attracting battery-specific expertise as we expand our U.S. business and begin ramping into the next year. Adjusted operating expenses year-to-date were $72.8 million compared to $75.1 million in the prior year nine-month period. On a year-to-date basis, this reduction in non-GAAP operating expense was mainly due to higher share-based compensation expense in the prior year nine-month period. GAAP net loss was $26.2 million in Q3 2023 compared to net loss of $36.5 million in Q3 2022. After adjusting for non-cash SBC expense and changes in fair value of our warrant liability, adjusted net loss was $10.3 million in Q3 2023 compared to an adjusted net loss of $17.4 million in Q3 2022. On a year-to-date basis, adjusted net loss was $30.2 million compared to an adjusted net loss of $61.4 million in the prior year nine-month period. You are starting to see that as we scale our business, we are making significant progress in narrowing our losses and expect this trend to continue in Q4 and beyond. The impact of these adjustments is shown in slide 13, and reconciliations of these non-GAAP metrics, the most comparable GAAP metrics, are included in the tables at the end of our earnings press release. Slide 14 shows the geographic breakdown of our revenue for Q3 2023 compared to the prior year period. As you can see, our European business showed an outstanding 455% year-over-year increase and accounts for 24% of our revenue, up from just 9% a year ago as key customers begin their vehicle rounds. We continue to expect substantial growth in our in-year revenues, especially for the 53.5 amp hour sale, with much of this already in backlog. As Zach mentioned, we have a couple of multi-year commercial vehicle nominations that would further When we add the important contributions from China and Asia-Pacific customers, our overall commercial vehicle revenues have grown 45% year-to-date versus 2022. On the U.S. side, revenues are behind where we wanted them to be, and deliveries on projects have been pushed out slightly. We will begin deliveries in Q4, and these should then make a meaningful contribution to overall 2024 revenues. 20 to 5.15... Our expansion in gross margin in Q4 is a crucial proof point in the maturity of our operations and the growing contribution from the commercial introduction of our new 53.5 amp hour cell. We expect to see further positive impacts of gross margin as Hoosier Phase 3.1 approaches full utilization in Q4 and once Clarksville Phase 1A starts qualified deliveries from Q2 next year. The backlog number of 678.7 million, with over 84% of this for the 53.5 amp hour cell, gives us good visibility into the utilization rates for our capacity expansions. Around 65% of the backlog is booked for 2024, mostly for customers in Europe and the U.S. And as Mr. Wu mentioned, we now need to launch a flexible phase 3.2 line in Huzhou to bring on more capacity to meet demand for 48 amp hour and 53.5 amp hour cells. As you know, our golden rule is that we only add capacity if supported by demand. This new line is situated in the same building as the phase 3.1 line, which was sized to support a total of 12 gigawatt hours. The lead time to add a new Phase 3.2 line will be around four to six months, with the majority of the investment being in additional production equipment. Net cash used in operating activities during the quarter was $29.3 million, which was primarily due to operating loss and working capital. Negative free cash flow in the quarter of $89.3 million resulted from this net operating cash outflow, as well as our capital investment program. The majority of this capital expenditure in Q3 was to fund our capacity expansion in Clarksville, which totaled $38.3 million. We also had capital expenditures totaling $21.6 million relating to improvements to our existing facilities and ongoing R&D projects. Looking ahead, we estimate that full-year capital expenditures and will primarily be used for the CLARPS or Phase 1A capacity expansion. Turning to slide 16, we detail the financial resilience of microbus. Our total debt outstanding of $99.5 million is relatively modest, and you can see that the maturity profile requires only $5 million to be repaid in the fourth quarter. Looking further out, total debt repayments up to 31 December 2025 are a very manageable $40.2 million. All of this debt is for our China operations, and none of it has any recourse to our U.S. holding structure or assets. We have approximately $70 million available to draw down in order to continue expansion and growth at our Hoosier facility, part of this being used for the estimated $35 million expansion. This incremental investment in a flexible automated line allows us to respond to both demand for the 53.5 amp hour cell that will exceed phase 3.1 capacity and also to deliver 48 amp hour cells for the hydrogen fuel cell market. Turning to the U.S. operations, these currently remain free of leverage and we continue to make solid progress on a project at financing, which is to be secured by the phase 1A expansion. We anticipate that facility to be in place during Q4. With that, I will turn it back over to Mr. Wu to review our outlook.
spk05: Thank you, Craig.
spk03: Please attend to slide 18, which provides a summary outlook for the upcoming months. For the first quarter, we expect the revenue to be in the range of $90 to $100 million, up 47% from Q4 a year ago at the midpoint, driving by increasing deliveries and production output from our EMEA and Asia-Pacific commercial vehicle customers. We are also targeting adjusted gross margin of 20% to 25%. Additionally, we are targeting a further increase to our previous utilization and aim to achieve 90% out of Huzhou 3.1 automatic line. Finally, if you turn to slide 19, we look at the four-year guidance update due to customer project delays. Some revenue recognition is being pushed into early 2024. We are providing an updated 2023 guidance for four-year revenue to be in the range of $292 million to $302 million, representing year-over-year revenue growth of 43% to 48%. This is still a high growth year. It's also worth noting that while we have some revenue slippage, the revenue we are delivering this year is at a much higher gross margin than we had anticipated. As Craig just mentioned, this means we have made real progress in narrowing our losses. So some of our projected first quarter revenue are pushing to early next year. We continue to anticipate a strong revenue growth into 2024 provided by visibility through both our sales pipeline and the record backlog. The excellent operational results we are seeing out of our 3.1 automatic production line gives us the confidence to expand capacity and a focus on accelerated ramp at our upcoming phase 1A production facility. We are seeing strong demand trajectory for microbus battery solutions worldwide and anticipate our substantial momentum in the first nine months of 2023 to carry forward as customer orders remain robust throughout the remainder of this year Add into that. Next. As we look to the final quarter of 2023, the tangible deliverables we asked you to judge as by the start of this year have been mostly accomplished. We are having a high growth year. We have record backlog that supports another high growth year in 2024. Most of that backlog is for 53 point amp hour cell, which has been rapidly industrialized. We are improving gross margins and approaching gross margin levels that our mature scale competitors achieve. We have reached a qualified production operations in our Huzhou phase 3.1 line. and I had a very successful milestone on this sizable investment. On this last item, it's difficult for me to fully convey the challenges in bridging battery technologies to the point of skilled advanced manufacturing. This is our third successful launch for the new technologies with their own dedicated line. And the CrossFit Office 1A will be a copy of Huzhou 3.1 production line. Before we close, I'd like to take a moment to thank our entire team at Microbots for their hard work and dedication. This course results are a testament to your commitment to excellence. And I'm so proud of what we have accomplished together. You have all risen to the occasion and exceeded expectations. Continue to innovate, deliver for our customers, and support each other through second thing. Thank you for all that you do. I am truly grateful to be part of this team. And now I will turn the call back to operator to start the Q&A session.
spk00: Thank you. We will now begin the question and answer session.
spk01: To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. The first question comes from Sameer Joshi with HC Wainwright. Please go ahead.
spk03: Hey, guys. Good afternoon. Thanks for taking my questions. It's good to see gross margin improvements beyond what you are targeting. And I understand yield improvements and some product leaks may be at play. But is there any other items that is helping boost gross margins? And more importantly, what are your targeted gross margins now that you are seeing this improvement already?
spk05: Can you answer this, Nizam?
spk03: Shall I say that one? Sure. So you've nailed a couple of them, right? So the utilization is really good. It's utilizations that were not really achieved before on phase one, phase two. The actual yield is better than we thought it would be at this stage of the year. Other factors, raw material prices have definitely helped as well. you know, what we're trying to achieve in Q4 is maintain that, you know, 20% to 25% adjusted gross margin. And if we do that, we should narrow those losses even further. Got it. On the GLAX, we'll sort of a little bit of a push out of Are there any factors that stood out for the delay or was it just regular delays that you expect in a plant ?
spk05: Do you want me to do that one or are you going to take it?
spk03: You do it. You can do it. Okay. Thank you. The reason is, and Zach mentioned it a little bit earlier, is that the equipment goes through factory acceptance test on ChinaSign, which is basically about 3,000 pieces of equipment that our team go through and make sure it passes that test. So we wanted to make some modifications that we learned about from putting 3.1 into operation. That's actually going to accelerate the ramp up when it comes to the US side. You probably think about this as a slight push out in a quarter, but it actually benefits you because it's actually quicker and cheaper to ramp throughout Q2. Understood. Thanks for that, Kala. On the delivery that has occurred in 3Q to higher and GBM group, Do we have any feedback from them, or is it too early to have any sort of feedback from performance or any issues there? You're talking about customer feedback from Hiker and JPM? That is right. Because of the 80 units, yes. These have been long-term customers. It just tells you that they love us, they love the products, and they're coming back for more.
spk05: Okay.
spk03: And then there was a slight increase in R&D expense this quarter related to previous quarters. I know the headcount increased, but were there any runtime items in this? It's really difficult to hear the last part of that question. Was there any one-time R&D expense or was it just should we expect these levels going forward? That's one-time expense. If you look at the changes in OPEX, it's a we are adding, you know, more headcount, and you're especially seeing that on the U.S. side as Zach referenced. Okay, good.
spk05: Good to see all the progress. Good luck. Thank you.
spk00: The next question comes from Sean Milligan with JANI. Please go ahead.
spk03: Hey, guys. Nice quarter. Can you talk a little bit more about the project pushouts that you're seeing in the fourth quarter and your kind of confidence and timing for those being first half 24 deliveries? Because it looks like, you know, kind of roughly, I guess, like 50 to 60 million pushed out. And just, again, want to give you the chance to reiterate your confidence in those coming through in the first half of next year. Zach, do you want to talk a little bit about the projects and I can just talk about sort of like the sort of, you know, the financial bit in the Q1 of next year? Sure. This is Zach. Yeah, these are just normal push-ins. We do anticipate that landing in 2024. This is just normal push and pulls of projects that we see from customers. So the bit I've just mentioned on Q4, Sean, which is really relevant, is that we're going to see a lot bigger contribution from Europe. You've seen that already. So Europe is like 20, 25% of Q3. Europe's going to have a really solid Q4 to the point where probably European revenues are going to grow like 5x this year. and then they're going to carry on accelerating into next year. And that's mostly for like 53.5 amp power cell. And then the backlog number is relevant, and I mentioned earlier that like over 65% of backlog is for next year. That's mostly European and U.S. customers. And as you know from our business, we – The China, Asia Pacific don't really do backlog. So what we'd also get into next year, again, is a really solid contribution from Asia Pacific customers.
spk05: Okay. Thanks, Craig. That's really helpful.
spk03: And I guess also kind of backing onto that, Well, a little bit of a question about third quarter and fourth quarter, which is phase one in China. Can you talk about how the utilization there has ramped this year? I think it was said it's like 70% now and targeting 90% exiting the fourth quarter. If you run that through and you kind of run through the legacy volumes in China, it seems like revenues would be a bit higher. So is some of that production... Can you talk about if there's any production from phase one that isn't being recognized in the back half of this year because of shipments maybe to, I don't know, the U.S. for storage containers or what's kind of being pushed into next year from that production profile? Okay. Phase one is really turning out 21 amp hour, so we're getting reasonable utilization of phase one line. if you're reading through like utilizations and revenues, what you've seen is a much higher, that's why I mentioned European contributions in Q3, that's pretty mature, like 53.5 amp power cells. And then what we've also been producing in Q3 is like cells that have gone into inventory that we're going to deliver in Q4 and Q1. And then same thing for Q4. And in phase three, 3.1 swap. But, like, so for phase 3.1, just based on the utilization that you talked about for the third quarter and the fourth quarter, it seems like you're building a lot of cell inventory for the first half of next year. Just kind of trying to see if you could comment on that, like how much cell inventory you're building related to, you know, pack deliveries early next year. Yeah. Sure. Building inventory for orders. So that's to meet the revenue guidance that we're giving you for Q4. And then also like backlog order that we need to deliver for Q1 as well. Okay. Yeah, we can take that offline too. And then I guess can you talk about the dating environment in the U.S. for battery storage? I know you talked about potential for additional bookings. in the fourth quarter related series to commercial vehicle contracts. I just wanted to get your thoughts on, you know, the utility scale storage in an environment for Clarksville next year.
spk05: You want to go? Yeah.
spk03: Would you like me to answer that, Craig? Yes, please. Yeah. Hey, Sean. This is Zach Ford. Yeah, we continue to see really strong demand in the energy storage sector. A unique advantage of microvacs in the market is that Clarksville, which enables our customers to achieve that additional domestic content, which gives them the ability to capitalize another 10% of their project. So we continue to see strong demand, a strong pipeline buildup, and great results from that market. The overall market in the U.S. has, I think, dissipated a little bit of headwinds with the raising interest rates and the appetite for tax equity, but it's still the number two market globally.
spk05: Okay, thank you.
spk03: I mean, I guess the question would be, like, do you anticipate being able to find additional offtake in the US for 2024 on storage, or are you getting more on 25 and 26 at this point? Yes, we're working diligently to increase our order intake for all the capacity for Clarksville 1A, as well as looking at opportunities for our 1B expansion. Okay, great.
spk05: I'll hand it over and come back if there's an opportunity.
spk00: Once again, if you have a question, please press star, then 1.
spk01: The next question comes from Colin Rush with Oppenheimer. Please go ahead.
spk03: Thanks so much, guys. You know, so just with the expansion in Vue Show, I want to make sure I understand something. You've got another $92 million of cash available that's not shown up on the balance sheet right now. So we've got plenty of cash to cover that $35 million from what I can see. And then, you know, as you execute on the ramp here, it sounds like you've, you know, you've kind of got a process in the equipment set pretty well, you know, codified at this point. So I just want to understand any sort of risk around either the financing or or the equipment set and the ramp-up that you guys are seeing on the horizon here as you execute against that plan. Okay. Zong, should I take the financing part? And I think, if you don't mind, can you do the ramp-up part? Because that's super important for Colin. Is that okay? Yeah, you can go. Colin, thank you. For Colin, you're right. The availability, we've got $70 million to fund more CapEx in China. It more than covers what we need for phase 3.2. We've added another working capital line in China as well. The reason you can do it is because you delivered on your promise. You told the bank, stay partly funded 3.1. You can build the building. You can get the equipment in. You can install it. You can get it to decent utilization. You can get it to good yield. And you've got customers and they're growing, right? So we did all those things. Now we need to have capacity. There's more orders for that. So it's funded. And I think at that point, I'll hand it over to Uzon, because he'll talk you through just how critical that ramp-up is and what it involves and why it's really then relevant to look at financing on the U.S. side as well. Yeah, thanks, Colleen. To build a factory from a laboratory, the technology, and to move to the product, it's not an easy job. Because you build a sample cell in the laboratory, that's only a few, or a dozen of them is much easier. If you're building the factory, consistency control is really, really critical. You have to make every battery It's identical. And every cell is the same performance. And, you know, the yield is really a big cost saver for the manufacturing because if your yield is low, you waste your net profit, not a gross profit. And so the yield, you know, since next battery is like a, literally like a 14 steps, if you want to get a 97% yield, you have to make every step 99.9%. If you times everything, you know, it's 14 times together. Now you get a 97%. That means, you know, the, every step you have to control very precisely. It's, it's a, you know, it's a big job and, uh, not easy to make a battery. And, but micro rods, you know, right now, you know, we really, we get there and, uh, we, In the first line, the hoodoo line, we spent a lot of effort to refine the process, to refine the, you know, equipment. That's why I extend our FAT test, you know, for Clarksville production line. We intentionally delay, do the very serial, you know, the FAT test, because if equipment move from China across the water to United States, that's much harder to, you know, to fix the problem. That's why you see the BW post fund. That's super helpful. And as you've ramped up the $63.5 amp hour sell, obviously getting to these coming yields and consistency is a key benchmark for your customers. Can you talk about how it's impacting both your commercial vehicle customers and your ability to close deals as well as what's happening with some of the stationary power customers that are looking forward to ramping up higher density products? You mean the commercial vehicle customers? For both, right? The question is, as you've proven out the vulnerability of the manufacturing operation, is that improving your leverage with customers to close deals and even potentially start driving some price increases? Oh, every customer, they were doing a very detailed factory inspection and audit. And you have to get a high score. You know, you have to get an A or over 90, you know, the score, over 90. Then you can pass the inspection. You can be a qualified supplier. Not only for production line, they check your quality control, your, you know, your deliverability, you know, can you deliver it, or your consistency, you know, deliver it. And all kinds of factors, you know, they check it.
spk05: It's very strict. Automotive is the most strict, you know, the process. Excellent.
spk03: And I guess the last one is, you know, with the stationary power product, as you've gotten into, you know, kind of the fabrication of that, are there any surprises that have come up in terms of performance or fabrication that we should be attending to?
spk00: Zach, can you answer that question?
spk03: Yeah, we've been really pleased, Colin, with the performance of the 53.5-hour cells. It continues to be a dramatic performance improvement over the competition with energy retention as well as round-trip efficiency. The round-trip efficiency is just so critical because these stationary projects continue to cycle every day for 20 to 27 and a half years. So if you're losing 1% or 2% efficiency, you can amortize that over the life of the power plant. So that value proposition continues to resonate with the market really strong.
spk05: Thanks so much, guys.
spk00: This concludes the question and answer session.
spk01: I would like to turn the conference back over to Mr. Vu for any closing remarks. Please go ahead.
spk05: Yeah, thank you, everybody, you know, to join us. Thank you.
spk00: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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