Microvast (US:MVST)2025-08-11 21:21PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited H1 2025 financial statements reflect improved operations, positive cash flow, and alleviated going concern doubts Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased, liabilities rose due to a new convertible loan, and stockholders' equity decreased | Balance Sheet Items | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 434,591 | 428,026 | | Total Assets | 1,004,692 | 951,867 | | Total Current Liabilities | 524,663 | 330,153 | | Total Liabilities | 648,562 | 563,972 | | Total Equity | 356,130 | 387,895 | - A significant change in liabilities is the appearance of a convertible loan measured at fair value, which is classified as a current liability of $181.5 million as of June 30, 2025, compared to a non-current liability of $104.6 million at the end of 202415 Unaudited Condensed Consolidated Statements of Operations H1 2025 operations show increased revenue, improved gross profit, and operating profit, offset by fair value losses | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 91,339 | 83,675 | 207,830 | 165,026 | | Gross Profit | 31,723 | 27,195 | 74,739 | 44,420 | | Profit/(Loss) from Operations | 16,214 | (98,741) | 35,146 | (121,859) | | Net Loss | (106,058) | (101,556) | (44,268) | (126,381) | | Basic and Diluted EPS | ($0.33) | ($0.32) | ($0.14) | ($0.40) | - A significant impairment loss of $88.0 million was recorded in the three and six months ended June 30, 2024, which did not recur at the same scale in 2025 ($1.4 million), contributing to the improved operating profit18 - Changes in the fair value of warrant liability and convertible loan resulted in a substantial loss of $121.5 million for the three months ended June 30, 2025, and $78.4 million for the six months ended June 30, 2025, heavily impacting the net loss18 Unaudited Condensed Consolidated Statements of Cash Flows H1 2025 saw significant positive operating cash flow, with overall cash and equivalents increasing to $138.8 million | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash generated from operating activities | 44,323 | 2,142 | | Net cash used in investing activities | (5,078) | (7,442) | | Net cash (used in)/ generated from financing activities | (6,799) | 28,488 | | Increase in cash, cash equivalents and restricted cash | 29,219 | 16,295 | | Cash, cash equivalents and restricted cash at end of period | 138,820 | 104,484 | - The positive operating cash flow was driven by improved operational performance and non-cash charges, including a $78.4 million change in fair value of warrant liability and convertible loan, despite a net loss of $44.3 million33 Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, going concern alleviation, revenue sources, convertible loan, and legal proceedings - The company concluded that it is probable that management's plans, including forecasted cash inflow from operations and refinancing of short-term debt, will alleviate the substantial doubt about its ability to continue as a going concern5051 | Geographic Region | Revenue for Six Months Ended June 30, 2025 ($ thousands) | Revenue for Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | China | 78,969 | 60,474 | | Other Asia & Pacific | 18,740 | 25,665 | | Europe | 98,935 | 75,666 | | U.S. | 11,186 | 3,221 | | Total | 207,830 | 165,026 | - The company is involved in multiple legal proceedings, including corporate governance actions, securities litigation, and other contract disputes; the potential financial exposure cannot be reasonably estimated at this time125129140 - On May 28, 2024, the company entered into a $25 million convertible loan agreement with its CEO, Mr. Yang Wu, resulting in a recorded loss of $78.2 million on fair value changes for the six months ended June 30, 2025114119 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2025 performance, strategic initiatives, and liquidity, noting going concern alleviation Business and Strategy Microvast specializes in advanced battery technology, pivoting to U.S. LFP production and advancing ASSB - The company is strategically pivoting its Clarksville, TN facility from NMC to LFP battery production to better serve the U.S. ESS market, citing lower costs, enhanced safety, and better environmental performance157158 - In January 2025, Microvast announced a breakthrough in all-solid-state battery (ASSB) technology, demonstrating a 48-volt monolithic cell prototype that eliminates liquid electrolytes and offers improved energy density and safety160 - As of the end of Q2 2025, the company's order backlog stood at $320.0 million, with most orders expected to be fulfilled in 2025 and 2026161 Results of Operations H1 2025 saw revenue growth, improved gross margin, and operating profit, offset by fair value losses | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenues | 207,830 | 165,026 | 25.9% | | Gross Profit | 74,739 | 44,420 | 68.3% | | Gross Margin | 36.0% | 26.9% | N/A | | Profit/(Loss) from Operations | 35,146 | (121,859) | (128.8)% | | Net Loss | (44,268) | (126,381) | (65.0)% | - The increase in revenue for the first six months of 2025 was primarily driven by a significant increase in sales volume from 654.9 MWh in 2024 to 947.2 MWh in 2025205 - General and administrative expenses for the six-month period decreased by $32.9 million (69.5%), mainly due to a $14.8 million reduction in share-based compensation and a $10.9 million positive foreign exchange impact208 Liquidity and Capital Resources Liquidity is supported by cash and positive operating cash flow, but additional financing is needed for U.S. expansion - Management has concluded that it is probable that its plans will alleviate substantial doubt about the company's ability to continue as a going concern, based on positive operating cash flow, a strong order backlog, and debt refinancing capabilities217224 - The company's cash position as of June 30, 2025, was $138.8 million, including $67.4 million held by Chinese subsidiaries and $17.3 million by European subsidiaries, which are not readily available for U.S. operations213214 - The Clarksville, TN expansion project requires additional financing to resume progress; the company is seeking alternative capital sources as proceeds from the Business Combination were insufficient and cash cannot be repatriated from China226227 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from international trade, interest rates, and foreign currency, notably Renminbi and Euro - The company faces significant foreign currency exchange risk, with a large portion of transactions in Chinese Renminbi and Euros; a hypothetical 10% adverse change in exchange rates could have resulted in a loss of $16.4 million as of June 30, 2025242243 - The company is exposed to interest rate risk through its project finance loans in China and a convertible loan in the U.S., which are tied to the Loan Prime Rate and Term SOFR, respectively240 - Ongoing trade developments between the U.S. and China, such as tariffs and import/export controls, may impact the company's ability to rely on its manufacturing centers in China239 Controls and Procedures Disclosure controls were ineffective as of June 30, 2025, due to a material weakness in IT general controls; remediation is underway - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of June 30, 2025249 - A material weakness persists related to information technology general controls (GITC) for the ERP system, specifically concerning developer access and monitoring of privileged users252 - The company is executing a remediation plan that includes removing inappropriate system access and establishing more robust monitoring processes for user activities and permissions253256 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, with uncertain outcomes and unestimable potential financial impact - The company is defending against various legal proceedings, but the outcome and potential financial impact cannot be reasonably estimated at this stage259 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for FY2024 have occurred - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, indicating no material changes260 Other Information Yixin Pan adopted a Rule 10b5-1 trading plan to sell shares, with no other similar plans by directors or officers - Yixin Pan adopted a Rule 10b5-1 trading plan on June 11, 2025, to sell up to 12,595 shares of common stock264 Exhibits This section lists exhibits filed with or incorporated by reference into the Form 10-Q, including key agreements and certifications