Microvast Holdings, Inc. (NASDAQ:MVST) Q3 2023 Earnings Call Transcript

Craig Webster: [Indiscernible] project and I can just talk about sort of like — sort of the financial into Q1 next year.

A – Zach Ward: Sure. This is Zach. Yes, these are just normal push outs. So we do anticipate that landing in 2024 they’re having just normal push and pulls of projects that we see from customers.

Craig Webster: And so I’ve just mentioned on q4, Sean, which is really relevant is that you are going to see a lot bigger contribution from Europe, you’ve seen that already. So Europe is like 20%, 25% of Q3. Europe is 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 hour cell. And then the backlog number is relevant as I mentioned earlier. The [indiscernible] 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’ll also get into next year again is a really solid contribution from Asia Pacific customers.

Sean Milligan: Okay. Thanks. Very good. Very helpful. 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 1 in China. Can you talk about how the utilization there has ramped this year? I think you said it’s like 70% now and targeting 90% equity in 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 it’s some of that production. But can you talk about if there’s any production from Phase 1 that isn’t being recognized in the back half of this year, because of shipments maybe to the U.S for storage containers, or what’s kind of being pushed into next year from that production profile?

Craig Webster: Okay. Phase 1 is really turning out 21 amp hour. So we’re getting reasonable utilization of Phase 1 line. If you’re reading through like utilizations from revenues, what you’ve seen is a much higher, that’s I mentioned European contributions in Q3. That’s pretty mature like 53.5 amp hour cell. And then what we’ve been producing in Q3 is like sales that have gone into inventory that we’re going to deliver in Q4 and Q1. And then same thing in Q4.

Sean Milligan: And in Phase 3, 3.1 swap, but like so for Phase 3.1 just based on the utilization that you’ve talked about for the third quarter and the fourth quarter, it seems like they’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 pack deliveries probably next year?

Craig Webster: Yes. Sean, building inventory for orders, so that’s to meet the revenue guidance that we’re giving you for Q4. And then also backlog of orders that we need to deliver for Q1 as well.

Sean Milligan: Okay. Yes, we can take that offline, too. And then I guess the — can you talk about the [indiscernible] environment in the U.S for battery storage? I know you talked about potential for additional bookings, in the fourth quarter related to commercial vehicle contracts. But just wanted to get your thoughts on the utility scale storage [indiscernible] environment for Clarksville next year.

Craig Webster: Do you want to go?

A – Zach Ward: Yes, I will. [Indiscernible] to that Craig?

Craig Webster: Yes, please.

A – Zach Ward: Yes. Hey, Sean, this is Zach Ward. Yes, we continue to see really strong demand in the energy storage sector. You need to [indiscernible] 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 the project. So we continue to see strong demand, a strong pipeline build up and great results from that market. The overall market in the U.S has, I think dissipated a little bit of headwinds with the rise in interest rates and the appetite for tax equity. But it’s still the number two market globally.