Microvast (MVST) - 2023 Q1 - Quarterly Report

Revenue and Sales Performance - Revenue for the period ended March 31, 2023, increased by $10.3 million to $47.0 million, representing a 28% increase compared to the same period in 2022[113] - Revenues increased from approximately $36.7 million for the three months ended March 31, 2022, to approximately $47.0 million for the same period in 2023, driven by an increase in sales volume from approximately 113.9 MWh to approximately 132.6 MWh[141] - Revenue from the People's Republic of China increased from $19.8 million (54% of total revenue) in Q1 2022 to $32.6 million (69% of total revenue) in Q1 2023[128] Order Backlog and Future Expectations - As of March 31, 2023, the order backlog for battery systems was approximately $486.7 million, equivalent to about 2,086.6 MWh, with over 90% attributed to the U.S. and Europe[113] - The company expects to fulfill a majority of its backlog within 2023 and 2024[113] Product Development and Capital Expenditures - The new high-energy nickel manganese cobalt (NMC) 53.5Ah battery cell is anticipated to be the dominant revenue driver for the next growth phase[112] - Total capital expenditures for capacity expansions in Huzhou, China, and Clarksville, Tennessee, are expected to be in the range of $460.0 million to $490.0 million, adding 4 GWh of capacity[122] - The company received a $200 million grant from the U.S. Department of Energy to support the construction of a new manufacturing facility in Kentucky, pending negotiation of terms[116] Financial Performance and Cost Management - Gross profit rose significantly from $13,000 in Q1 2022 to $4.9 million in Q1 2023, resulting in a gross margin increase from 0.0% to 10.3%[140][143] - Operating loss decreased from $43.3 million in Q1 2022 to $31.3 million in Q1 2023, reflecting an improvement of $11.9 million or 27.6%[140] - Total operating expenses decreased by $7.2 million, or 16.5%, from $43.4 million in Q1 2022 to $36.2 million in Q1 2023[140] - Manufacturing costs are influenced by raw material price fluctuations, and the company aims to manage these costs through productivity improvements and supplier negotiations[125] Cash Flow and Liquidity - Cash and cash equivalents, along with short-term investments, totaled $285.8 million as of March 31, 2023, providing sufficient liquidity for operations[148] - Cash used in operating activities decreased from $24.9 million in Q1 2022 to $11.2 million in Q1 2023, indicating improved cash flow management[160] - Cash used in investing activities totaled $35.8 million in Q1 2023, primarily for the expansion of manufacturing facilities[162] Debt and Financial Risk Management - The company had bank borrowings of $51.0 million as of March 31, 2023, with interest rates ranging from 4.5% to 4.8% per annum[151] - The net loss attributable to Microvast Holdings, Inc.'s shareholders decreased from $43.8 million in Q1 2022 to $29.6 million in Q1 2023, a reduction of 32.4%[140] - The company has cash and cash equivalents primarily in cash and money market accounts, with fixed-rate bonds payable, indicating limited exposure to interest rate fluctuations[166] Credit and Foreign Exchange Risk - A hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would increase the allowance for credit losses by approximately $0.8 million as of March 31, 2023[171] - An immediate 10% adverse change in foreign exchange rates on Renminbi-denominated accounts would result in a foreign currency loss of $2.0 million[169] - The company closely monitors credit risk by granting credit only to clients with good credit ratings and reviewing the recoverable amount of each debtor at the end of each reporting period[170] - The company may consider entering into derivatives or other financial instruments in the future to hedge foreign currency exchange risk[169] - The company’s project finance loans in China are exposed to movements in the Loan Prime Rate, which could materially affect interest expenses going forward[166] Investment Strategy - The company’s investment activities aim to preserve principal while maximizing income, with a portfolio that is relatively insensitive to interest rate changes[167] - The company evaluates its investment policy regularly to ensure alignment with overall objectives[167] - The company has a dedicated team for determining credit limits and monitoring overdue debts to minimize credit risk[172] Seasonal Trends - The company has historically experienced higher sales during the third and fourth fiscal quarters compared to the first and second quarters, indicating seasonality in sales[173]