8/11/2025

speaker
Conference Operator
Conference Operator

Thank you for standing by. This is the conference operator. Welcome to the MicroVast second quarter 2025 earnings call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. I would now like to turn the conference over to MicroVast Investor Relations. Please go ahead.

speaker
MicroVast Investor Relations
Investor Relations

Thank you, operator, and thank you, everyone, for joining our update today.

speaker
Rodney Worthen
VP of Corporate Strategy and Interim CFO

This is Rodney Worthen, VP of Corporate Strategy and Interim CFO, and with me on today's call is Mr. Yang Wu, Founder, Chairman, and CEO. Mr. Wu will start off with a high-level overview of the second quarter results before providing some operational and business updates. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook for the remainder of the year in closing remarks. Ahead of this call, MicroVASP issued its second quarter earnings press release, which can be found on the investor relations section of our website, ir.microvasp.com. We have also posted a slide presentation to accompany management's prepared remarks today. As a reminder, please note that this call may include forward-looking statements. These statements are based on the current expectations and assumptions and should not be relied upon as representative of views for subsequent dates. We undertake no obligation to revise or 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 and slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microbash's website. Now, I'll turn the call over to Mr. Wu to kick things off.

speaker
Yang Wu
Founder, Chairman, and CEO

Hello, everyone. Thank you for joining us today. To those of you who have been with us for years, and for those who are new to our story, I want to start by reminding you of our core mission. Founded in Texas in 2006, MicroVast has grown into a global leader in advanced battery technology. With over 810 patents granted or pending, and our electrified solutions successfully deployed worldwide, We are proud to be a driving force in the global energy transition, building a more sustainable future, one battery at a time. Over the past year, our commitment to innovation has delivered some major milestones. We launched the ME6, our pioneering overhaulable LFP-based energy storage system. We have also made great strides in our silicon-based cell technologies, and are making significant progress in our development of all solid-state batteries. These innovations are the engine of our growth, and we are excited to share some updates in the future. Please turn to slide four, and I will cover some key results. We posted a record second quarter revenue of $91.3 million, which is a solid 9.2% growth year over year. What makes this continual growth remarkable is that we attained, while improving our growth margin to 34.7%, a 2.2 percentage point improvement from the same period last year. This demonstrates not only our ability to grow, but also to achieve this growth efficiently. We continue to focus on improving both efficiency and profitability. And I am happy to say that we achieved operating profit in the second quarter of $16.2 million with an adjusted net profit of $16.3 million and an adjusted EBITDA of $25.9 million. This isn't just a milestone for MicroVast. It's a testament for both the long-term commitment required in the industry and the strength of our business model. This strength is also shown by looking back over the last several years, where our Q2 revenue has continuously grown. This growth illustrates the increasing market demand for our high-performance product. Our gross profit has also seen continuous improvement, which shows that we can commercialize our advanced technologies and operate at scale. Our rapid growth has given us invaluable experience, allowing us to successfully commercialize products across our diverse portfolio and refine our manufacturing processes. Moving forward, our focus remains on three things, continuous innovation, the execution of our strategic growth objectives and expanding our capacity to meet the growing demand from our customers. We are well positioned for the future. Let's move to slide five, where I will highlight our consistent focus. At its core, Microgas is a vertical integrated battery technology innovator. Our primary engine for growth is a relentless commitment to technology and product development. Fueling a promising pipeline of advanced solutions, we are actively expanding our revenue streams with a diverse portfolio of products and services, all designed to accelerate the global energy transformation. A key element of our strategy is our aggressive push to capture greater market share. We are making significant investments to commercialize both our current available and our highly anticipated future advanced products. We are staying disciplined with the dual focus on pioneering product innovation and expanding our market presence. This is how we intend to achieve significant sustainable growth and optimize our operations with the ultimate goal of attending sustained profitability. Turning to slide six, I am pleased to give you an update on our Huzhou phase 3.2 expansion. The clean rooms are completed and the utility equipment installation is finished. We are now in the stage of installing and commissioning the production equipment. Our phase 3.2 expansion is still anticipated to add about 2 GWh of annual production capacity, which is strategically timed to meet the strong market demand for our solutions, both currently and upcoming. This expansion leverages our existing infrastructure and deep industry expertise, and we anticipate the first qualified production from this new line to commence in the fourth quarter of 2025. This is an exciting step forward in our growth story into 2026 and beyond. Moving to slide seven, I'd like to give an update on our all solid-state battery milestones. Building on our update in Q1, our proprietary five-layer cell has stable cycling with a continued high Columbia efficiency. It has achieved over 304 charge discharge cycles at 1C with steady capacity retention across the cycling window, shown in Figure 1. This indicates robust interfacial integrity with minimal losses during charge transfer, which is critical for battery longevity and performance. This result affirms our engineering approach and the structural stability of our all solid-state architecture under long-term stress conditions. Additionally, our 12-layer functional prototype achieved 48 votes from a single integrated stack. The voltage capacity profile is seen in Figure 2 and validates its performance. Figure 3 shows a cross-sectional image that confirms the uniformity and series-connected architecture. This validates the feasibility of high-voltage solid-state cells with minimal packaging complexity. On slide 8, we will continue the discussion of our all-solid-state battery achievements with a focus on advantages versus traditional battery and anticipate avenues for commercialization. The first key advantage is a simplified system design, where traditional battery cells are constrained by liquid electrolyte decomposition at voltage between 4 to 5 volts. Our technology allows us to output tens to hundreds of volts, additionally The removal of liquid electrolytes present in traditional batteries also eliminates the need for complex and costly voltage conversion. This simplified architecture opens the door for new applications and end users. Our all-star state battery design also portrays inheritance fault tolerance. Unlike conventional cells, our multi-layered design localizes any potential defect and prevent single point of failure situation. This resiliency is crucial for mission-critical applications. With high voltage output capability and a simplified architecture, fewer required connections and lower manufacturing costs, our design accelerates a path to potential commercial-scale production. And with the combination of all solid-state safety, compact form factor, and flexible voltage, this technology is ideally suited for emerging sectors like robotics, AI, and aerospace applications. Now I will turn the call over to Ronnie to discuss our financials

speaker
MicroVast Investor Relations
Investor Relations

for the second quarter and the year to date. Thank you, Mr. Wu. Please join me on slide 10.

speaker
Rodney Worthen
VP of Corporate Strategy and Interim CFO

We're proud to report another record-breaking second quarter, with revenue growing 9.2% year-over-year to $91.3 million from $83.7 million last year. Our year-to-date revenue represents a top-line growth of 25.9%. to $208 million from $165 million in the prior year period, driven by an increase of approximately 300 megawatt hours in sales volume. Turning to profitability, our gross profit for the second quarter was $31.7 million, a 17% improvement over the same period last year, driven by our relentless focus on operational execution, increased utilization, and cost controls. Our gross margin improved by 2.2 percentage points, to 34.7%, up from 32.5% in Q2 2024. Our year-to-date gross profit is now $74.7 million, a 68% increase over last year, with gross margins improving to 36%, a 9.1 percentage point improvement. Operating expenses decreased to $16.5 million for the quarter, compared to $126.7 million in Q2 2024, an 87% reduction year-over-year, This reduction across G&A, R&D, and sales and marketing was largely due to reduced share-based compensation and previously implemented cost control measures. There is also a significant decrease due to impairment costs incurred in the prior year period. For the same reasons, OPEX also decreased for the first half of the year to $42 million, down from $168 million in the prior year period. We reported a gap net loss of 106.1 million in the quarter. However, after adjusting for non-cash expenses, such as share-based compensation of 0.8 million and fair value changes to our convertible loan and associated warrants of 121.5 million, we achieved an adjusted net profit of 16.3 million, a substantial improvement from adjusted net loss of 87.9 million last year. For the six-month period, GAAP net loss was $44.3 million compared to a net loss of $126.4 million in the prior year period. Non-GAAP adjusted net profit year-to-date was $35.6 million, a major improvement from an adjusted net loss of $100.9 million last year. Our commitment to sustainable profitability is evident as we report another consecutive quarter of positive adjusted EBITDA, reaching $25.9 million. This is substantial turnaround from a negative adjusted EBITDA of $78.4 million in Q2 2024. Positive adjusted EBITDA for the six-month period reached $54.4 million compared to a negative adjusted EBITDA of $82.1 million in the prior year period. The financial reconciliations of these non-GAAP metrics can be found in the tables at the end of our earnings press release and this slide presentation. On slide 11, we show the geographic breakdown of our revenue mix compared to the prior year period. Our EMEA business accounted for 43% of our quarterly revenue. This is down slightly year over year due to customer platform launches being pushed into later quarters. However, growth over the six month period still saw an improvement of 31% compared to the prior year. The US increased from 2% to 5% of revenue share, both for the quarter and year to date when compared to the prior year periods, as we continue to make inroads with domestic customers. The APAC region continues to do well, growing 34% in the quarter and 13% year to date compared to 2024, as we also successfully target higher margin opportunities. Please turn to slide 12 and we will briefly review our cash flow for the year. We are pleased to have generated positive operating cash flow of $44.3 million for the six-month period. Net loss was primarily offset by $7.1 million decrease in inventory and non-cash adjustments of $16.5 million in DNA and $78.4 million from changes in fair value of warrant liability and convertible loan. This was partially decreased by $14.5 million increase in net receivables and a $12.6 million decrease in net liabilities and accrued expenses. From investing activities, we had a net outflow of $5.1 million, primarily related to CapEx for our Hoosier operations, including our Phase 3.2 expansion. Financing cash flow resulted in a net outflow of $6.8 million. Overall, when combined with a negative adjustment from exchange rates of $3.2 million, we had an increase in cash of $29.2 million. This resulted in total cash, cash equivalents, and restricted cash of $138.8 million at quarter's end. This financial strength is a testament to our disciplined approach to growth. On one last note, I would like to thank again our long-term investors. We recognize that our share price has been volatile at times, and we appreciate your continued support and recognition of the goals that we are striving for as a company. Our teams have been singularly focused on turning around our operations and delivering these results, and we are grateful for your patience. It's been a turbulent few years for the whole industry, and the turnaround in the past year for the company has been a great effort from the team. While we need to continue executing and strengthening our financial position, our performance confirms that we have established a profitable and resilient foundation powered by a strong market demand. We're not just improving, we're building momentum. Our unwavering focus on sustainable profitability, enhancing margins, and boosting operational efficiencies is propelling us forward. We remain committed to our strategic vision and believe our continued progress will increasingly reveal the true value MicroVAS delivers as a leader across the electric energy markets. Now, I will hand it back over to Mr. Wu to go over our outlook for the remainder of the year and closing remarks.

speaker
Yang Wu
Founder, Chairman, and CEO

Thank you, Ronnie. Please attend to slide 14, which provides a summary outlook for the rest of the year. For the remainder of 2025, Our initial revenue guidance holds firm. We are targeting a year-over-year revenue increase of 18% to 25%, which put our projected range between $450 million and $475 million. We are slightly updating our targeted full-year gross margin from 30% to 32%, as we are focusing on stronger-performing, higher-margin products. In our APAC operations, all eyes are on our Phase 3.2 expansion at the Huzhou facility, which we anticipate will come online later this year. This additional capacity of up to 2 GWh annually is the direct response to the robust customer demand for our solutions. Our development team are also making significant progress on the next wave of advanced products. Our high-growth EMEA business is expected to maintain a strong momentum, continuing to drive significant year-over-year revenue increases. We are actively pursuing new strategic partnerships to support both our current and upcoming product lines in the region. In the Americas, we anticipate a continued revenue growth and our being proactive in customer acquisitions and accessing our financing needs to support strategic objectives. Despite navigating global dynamics and localized market pressures, our proactive cost management and strategic focus on high demand sectors has positioned us for continued growth. We remain laser focused on achieving our priorities for the remainder of this year, which are achieving positive cash flow, sustaining our strong margins, and expanding our market reach through reluctance, innovation, and strategic collaboration. We are confident that we can continue to capitalize on electrification trends and deliver long-term value to our shareholders. Thank you everyone for joining us today to review another historical quarter for Michael Vast.

speaker
MicroVast Investor Relations
Investor Relations

We look forward to updating you again next quarter.

speaker
Conference Operator
Conference Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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