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Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Microvast Reports Third Quarter 2021 Results


Microvast Holdings, Inc. (NASDAQ:MVST) ("Microvast" or the "Company"), a technology innovator that designs, develops and manufactures lithium-ion battery solutions, today announced consolidated financial results for the third quarter ended September 30, 2021 ("Q3 2021"). During Q3 2021, Microvast successfully completed a business combination with Tuscan Holdings Corp. (the "business combination") on July 23, 2021.

"As an established battery technology company with proven products and a robust pipeline of new technologies, we are excited by the industry demand and validation of our battery solutions. I am pleased to report that we have won several new multi-year contracts with leading OEMs, driving substantial growth in forecasted contracted revenue since the business combination was announced in February 2021. Furthermore, as part of our continuing mission to develop disruptive battery technology and advance a greener, more electric future, we expect to announce two new products in the first quarter of 2022. These products will complement our existing portfolio of battery solutions with industry leading charging times, extended life cycles, and enhanced safety performance," said Yang Wu, Microvast's President and Chief Executive Officer.

"The successful business combination was an important milestone, accelerating our ability to develop and commercialize disruptive battery technologies that we believe will revolutionize transportation. Localized production near our current and prospective customers across Europe and North America will be crucial to our success and our capacity expansion plans remain on track following the business combination. While we have continued to face multiple challenges on macroeconomic and industry levels, we remain excited by the overall industry outlook and the opportunities for our battery solutions," Mr. Wu added.

Results for Q3 2021

Revenue was $36.9 million for Q3 2021, compared to $30.8 million for the quarter ended September 30, 2020 ("Q3 2020"), an increase of 20%, driven by the increase in sales of battery products to new and existing customers.

Gross loss was $35.9 million in Q3 2021, compared to gross profit of $3.7 million in Q3 2020. The change was largely due to a $34.1 million one-time product warranty accrual and a $6.6 million inventory write-down (both primarily related to certain legacy products), increased raw material prices and a $2.3 million share-based compensation expense accrued following the business combination.

Operating expenses in Q3 2021 were $78.0 million compared to $12.7 million in Q3 2020. The change in operating expenses was largely due to a $56.0 million share-based compensation expense accrued following the business combination as well as increased headcount to support the Company's planned growth initiatives and other expenses related to operating as a public company.

Net loss was $116.5 million in Q3 2021 compared to net loss of $10.1 million in Q3 2020. The change was primarily due to the reduction in gross profit and higher operating expenses as described above.

As a result of the successful business combination, Microvast ended Q3 2021 with approximately $612.5 million in cash, cash equivalents and restricted cash.

The Company's backlog on September 30, 2021 was $52.7 million.

Full Year 2021 Outlook

Based on current business conditions, business trends and other factors, Microvast is reaffirming its previous revenue outlook, and expects revenue for the year ending December 31, 2021 to be in the range of $145 million to $155 million.

Based on equipment delivery schedules and scheduling during the upcoming holiday season, the Company expects some of its previously planned 2021 capital expenditures to move into early 2022. Total capital expenditures for the year ending December 31, 2021 are now expected to be in the range of $120 million to $150 million.

Webcast Information

Company management will host a webcast on November 15, 2021, at 5:00 p.m. Central Time, to discuss the Company's financial results. The webcast will be accessible from the Events & Presentations tab of Microvast's investor relations website (https://ir.microvast.com/events-presentations/events). A replay will be available following the conclusion of the event. Investment community professionals interested in participating in the live Q&A session may join the call by dialing +1 (631) 891-4304.

About Microvast

Microvast is a technology innovator that designs, develops and manufactures lithium-ion battery solutions. Microvast is renowned for its cutting-edge cell technology and its vertical integration capabilities which extend from core battery chemistry (cathode, anode, electrolyte, and separator) to modules and packs. By integrating the process from raw material to system assembly, Microvast has developed a family of products covering a breadth of market applications, including electric vehicles, energy storage and battery components. Microvast was founded in 2006 and is headquartered near Houston, Texas. For more information, please visit www.microvast.com or follow us on LinkedIn or Twitter (@microvast).

Cautionary Statement Regarding Forward-Looking Statements

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "guidance," "outlook" or words of similar meaning. These forward-looking statements include, but are not limited to, statements regarding Microvast's industry and market sizes, future opportunities for Microvast and Microvast's estimated future results. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.

In addition to factors identified elsewhere in this communication, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) a delay or failure to realize the expected benefits from the business combination; (2) the impact of the ongoing COVID-19 pandemic; (3) changes in the highly competitive market in which Microvast competes, including with respect to its hiring abilities, competitive landscape, technology evolution or regulatory changes; (4) changes in the markets that Microvast targets; (5) risk that Microvast may not be able to execute its growth strategies or achieve profitability; (6) the risk that Microvast is unable to secure or protect its intellectual property; (7) the risk that Microvast's customers or third-party suppliers are unable to meet their obligations fully or in a timely manner; (8) the risk that Microvast's customers will adjust, cancel, or suspend their orders for Microvast's products; (9) the risk that Microvast will need to raise additional capital to execute its business plan, which may not be available on acceptable terms or at all; (10) the risk of product liability or regulatory lawsuits or proceedings relating to Microvast's products or services; (11) the risk that Microvast may not be able to develop and maintain effective internal controls; (12) the outcome of any legal proceedings that may be instituted against Microvast or any of its directors or officers; and (13) risks of operations in the People's Republic of China.

Actual results, performance or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance as projected financial information and other information are based on estimates and assumptions that are inherently subject to various significant risks, uncertainties and other factors, many of which are beyond our control. All information set forth herein speaks only as of the date hereof in the case of information about Microvast or the date of such information in the case of information from persons other than Microvast, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication. Forecasts and estimates regarding Microvast's industry and end markets are based on sources we believe to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part.

MICROVAST HOLDINGS, INC.

SELECTED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

 

 

 

December 31,
2020

 

 

September 30,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,496

 

 

$

572,609

 

Restricted cash

 

 

19,700

 

 

 

39,900

 

Accounts receivable (net of allowance for doubtful accounts of $5,047 and $4,796 as of December 31, 2020 and September 30, 2021, respectively)

 

 

76,298

 

 

 

67,243

 

Notes receivable

 

 

20,839

 

 

 

10,260

 

Inventories, net

 

 

44,968

 

 

 

47,820

 

Prepaid expenses and other current assets

 

 

6,022

 

 

 

12,964

 

Amount due from related parties

 

 

-

 

 

 

128

 

Total Current Assets

 

 

189,323

 

 

 

750,924

 

Property, plant and equipment, net

 

 

198,017

 

 

 

222,771

 

Land use rights, net

 

 

14,001

 

 

 

13,935

 

Acquired intangible assets, net

 

 

2,279

 

 

 

2,024

 

Other non-current assets

 

 

890

 

 

 

702

 

Total Assets

 

$

404,510

 

 

$

990,356

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

42,007

 

 

$

36,557

 

Advance from customers

 

 

2,446

 

 

 

2,343

 

Accrued expenses and other current liabilities

 

 

60,628

 

 

 

48,065

 

Income tax payables

 

 

664

 

 

 

665

 

Short-term bank borrowings

 

 

12,184

 

 

 

22,851

 

Notes payable

 

 

35,782

 

 

 

43,131

 

Bonds payable

 

 

29,915

 

 

 

-

 

Total Current Liabilities

 

 

183,626

 

 

 

153,612

 

Deposit liability for series B2 convertible preferred shares ("Series B2 Preferred")

 

 

21,792

 

 

 

-

 

Long-term bonds payable

 

 

73,147

 

 

 

73,147

 

Warrant liability

 

 

-

 

 

 

2,461

 

Share-based compensation liability

 

 

-

 

 

 

8,841

 

Other non-current liabilities

 

 

110,597

 

 

 

35,511

 

Total Liabilities

 

$

389,162

 

 

$

273,572

 

Total Mezzanine Equity

 

$

399,950

 

 

$

-

 

Total Shareholders' (Deficit)/Equity

 

 

(384,602

)

 

 

716,784

 

Total Liabilities, Mezzanine Equity and Shareholders' Equity

 

$

404,510

 

 

$

990,356

 

MICROVAST HOLDINGS, INC.

SELECTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share and per share data)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

Revenues

 

$

30,753

 

 

$

36,894

 

 

$

59,400

 

 

$

85,204

 

Cost of revenues

 

 

(27,075

)

 

 

(72,779

)

 

 

(50,950

)

 

 

(129,100

)

Gross profit/(loss)

 

 

3,678

 

 

 

(35,885

)

 

 

8,450

 

 

 

(43,896

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

(4,721

)

 

 

(57,058

)

 

 

(12,670

)

 

 

(67,810

)

Research and development expenses

 

 

(4,558

)

 

 

(13,518

)

 

 

(12,518

)

 

 

(23,199

)

Selling and marketing expenses

 

 

(3,456

)

 

 

(7,380

)

 

 

(9,464

)

 

 

(14,242

)

Total operating expenses

 

 

(12,735

)

 

 

(77,956

)

 

 

(34,652

)

 

 

(105,251

)

Subsidy income

 

 

(39

)

 

 

545

 

 

 

802

 

 

 

2,676

 

Loss from operations

 

 

(9,096

)

 

 

(113,296

)

 

 

(25,400

)

 

 

(146,471

)

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

66

 

 

 

97

 

 

 

502

 

 

 

304

 

Interest expense

 

 

(1,397

)

 

 

(1,247

)

 

 

(4,234

)

 

 

(4,630

)

Loss on changes in fair value of convertible notes

 

 

-

 

 

 

(3,018

)

 

 

-

 

 

 

(9,861

)

Gain on change in fair value of warrant liability

 

 

-

 

 

 

1,113

 

 

 

-

 

 

 

1,113

 

Other income (expense), net

 

 

68

 

 

 

(19

)

 

 

63

 

 

 

25

 

Loss before provision for income taxes

 

 

(10,359

)

 

 

(116,370

)

 

 

(29,069

)

 

 

(159,520

)

Income tax benefit (expense)

 

 

270

 

 

 

(106

)

 

 

(5

)

 

 

(324

)

Net loss

 

$

(10,089

)

 

$

(116,476

)

 

$

(29,074

)

 

$

(159,844

)

Less: Accretion of Series C1 Preferred

 

 

975

 

 

 

251

 

 

 

2,923

 

 

 

2,257

 

Less: Accretion of Series C2 Preferred

 

 

2,216

 

 

 

570

 

 

 

6,650

 

 

 

5,132

 

Less: Accretion of Series D1 Preferred

 

 

4,662

 

 

 

1,190

 

 

 

13,986

 

 

 

10,708

 

Less: Accretion for noncontrolling interests

 

 

4,002

 

 

 

1,516

 

 

 

11,924

 

 

 

9,523

 

Net loss attributable to ordinary shareholders of Microvast Holdings, Inc.

 

$

(21,944

)

 

$

(120,003

)

 

$

(64,557

)

 

$

(187,464

)

Net loss per share attributable to ordinary shareholders of Microvast Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.22

)

 

$

(0.49

)

 

$

(0.65

)

 

$

(1.27

)

Weighted average shares used in calculating net loss per ordinary share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

99,028,297

 

 

 

243,861,780

 

 

 

99,028,297

 

 

 

147,836,650

 

MICROVAST HOLDINGS, INC.

SELECTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

   

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(29,074

)

 

$

(159,844

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Loss on disposal of property, plant and equipment

 

 

205

 

 

 

6

 

Depreciation of property, plant and equipment

 

 

11,384

 

 

 

14,398

 

Amortization of land use right and intangible assets

 

 

529

 

 

 

499

 

Share-based compensation

 

 

-

 

 

 

58,290

 

Changes in fair value of warrant liability

 

 

-

 

 

 

(1,113

)

Changes in fair value of convertible notes

 

 

-

 

 

 

9,861

 

(Reversal) allowance of doubtful accounts

 

 

(861

)

 

 

261

 

Provision for obsolete inventories

 

 

1,326

 

 

 

12,667

 

Impairment loss from property, plant and equipment

 

 

645

 

 

 

867

 

Product warranty

 

 

2,468

 

 

 

44,610

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Notes receivable

 

 

10,630

 

 

 

10,782

 

Accounts receivable

 

 

11,782

 

 

 

9,425

 

Inventories

 

 

6,021

 

 

 

(15,127

)

Prepaid expenses and other current assets

 

 

(625

)

 

 

(6,874

)

Amount due from/to related parties

 

 

1,859

 

 

 

(128

)

Other non-current assets

 

 

(154

)

 

 

52

 

Notes payable

 

 

(8,612

)

 

 

6,868

 

Accounts payable

 

 

(2,545

)

 

 

(5,944

)

Advance from customers

 

 

(1,165

)

 

 

(130

)

Accrued expenses and other liabilities

 

 

1,981

 

 

 

(6,371

)

Other non-current liabilities

 

 

-

 

 

 

2,292

 

Income tax payables

 

 

5

 

 

 

-

 

Net cash generated from/(used in) operating activities

 

 

5,799

 

 

 

(24,653

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(15,375

)

 

 

(40,718

)

Proceeds on disposal of property, plant and equipment

 

 

6

 

 

 

-

 

Purchase of short-term investments

 

 

(2,002

)

 

 

-

 

Proceeds from maturity of short-term investments

 

 

2,946

 

 

 

-

 

Net cash used in investing activities

 

 

(14,425

)

 

 

(40,718

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

15,230

 

 

 

26,603

 

Repayment of bank borrowings

 

 

(17,590

)

 

 

(15,665

)

Loans borrowing from related parties

 

 

18,063

 

 

 

8,426

 

Repayment of related party loans

 

 

(18,063

)

 

 

(8,426

)

Merger and Private Investment in Public Equity ("PIPE") financing

 

 

-

 

 

 

747,791

 

Payment for transaction fee in connection with the merger transaction

 

 

-

 

 

 

(42,821

)

Repurchase shares from exited noncontrolling interests

 

 

-

 

 

 

(139,038

)

Issuance of convertible notes

 

 

-

 

 

 

57,500

 

Net cash (used in)/generated from financing activities

 

 

(2,360

)

 

 

634,370

 

Effect of exchange rate changes

 

 

534

 

 

 

2,314

 

(Decrease) Increase in cash, cash equivalents and restricted cash

 

 

(10,452

)

 

 

571,313

 

Cash, cash equivalents and restricted cash at beginning of the period

 

 

41,784

 

 

 

41,196

 

Cash, cash equivalents and restricted cash at end of the period

 

$

31,332

 

 

$

612,509

 

 


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