Microvast Holdings, Inc. (MVST) Q3 2026 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the MicroVest Third Quarter 26 Earnings Call. As a reminder, all participants are in a 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.

Thank you, operator. Thank you everyone for joining our update today. This is Rodney Worthen, chief financial officer of MicroVest. And with me on today's call is Mr. Yang Wu, founder, chairman, and chief executive officer of Microvast. I will start off with a review of third quarter results before handing the call over to Mr. Wu to provide some operational and business updates. Ahead of this call, Microvast issued its third quarter earnings press release, which can be found on the Investor Relations section of our website. Ir.microvast.com. We have also posted a slide presentation to accompany management's prepared remarks for today's call. As a reminder, please note that this call may include forward looking statements. Statements are based on current expectations and assumptions and should not be relied upon as representative of our views on 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, including substantial balance and our ability to continue with the going concern, Please refer to our filings with the SEC, including our quarterly report on Form 10 q for the quarter ended September 30. 2026. 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 the most directly comparable GAAP metrics in the tables included at the end of earnings press release and slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of MicroVest website. Now please join me on Slide 3, where details our third quarter results for the rest of our years. Our revenues for the quarter decreased by $77.5 million or 62.8% compared to the same period in 2025. The decrease was primarily driven by a 62.2% reduction in sales volume from approximately 502 megawatt hours in Q3 2020 5 approximately 190 megawatt hours for the same period in 2026. The decline reflected weaker sales across Europe and APAC as a result of softer end market demand for heavy trucks port equipment, and heavy mining equipment which led to reduced orders from several of our long standing customers across Europe and APAC. Demand continued to be adversely affected by evolving commercial vehicle regulatory and geopolitical dynamics including Indian and Korean markets and demand shift towards lower cost products in India. Decrease in US sales versus the prior year period was primarily due to our largest customer, bringing product into 2025 as a result of uncertainty around tariff outcomes. Our cost of revenues for the quarter decreased by $38.1 million or 52.7% compared to the same period in 2025, primarily due to the decrease in sales volume. Our gross profit margin was 5.2% for the quarter compared to 37.6% in 2025. This change was primarily attributable to a $9.3 million write down for obsolete inventories related to specialized ESS components. And other inventories negatively impacted our gross margin by 20.4 percentage points. Excluding the impact of the noncash charge, the decreased gross margins reflected significant reduction in sales volume and continued pricing pressure in lithium battery industry. Decrease in revenue also reduced the absorption of fixed manufacturing and operating costs further compressing gross margin. Our gross margin profile is subject to external pressures, including inflationary trends and raw material pricing, duties, taxes, and tariffs, elevated logistics and freight expenses resulting from ongoing global supply chain disruptions and geopolitical conflicts. China has imposed a 2% consumption tax on lithium battery products sold in China effective 09/01/2026. And we will increase the tax to 4% effective 09/01/2027. China also reduced the value added tax export rebate rates for specified lithium battery products from 9% to 6% effective 04/01/2026 and will eliminate the export rebate effective 01/01/2027. While we continue to implement cost mitigation strategies with macroeconomic factors combined with a phase out of regional subsidies for electric vehicle adoption have contributed to a challenging environment for near term profitability across the battery manufacturing sector. Turn to Slide 4 to view our P&L for the quarter and year to date. Let's jump to operating expenses for the quarter, which increased to $69 million to $31.6 million in 2025. A 118.8% increase year over year. General and administrative expenses for the quarter increased by $2.6 million or 14.7% for the same period in 2025. This increase was primarily due to provision of $5.1 million for litigation settlement. Under the company's insurance policy, the company's total retention is capped at $10 million representing its self insured retention. The remaining cost and fees, including the remainder of any proposed settlement, are expected to be covered by the insurance. As of 09/30/2026, the company had paid $4.9 million in self-insured retention and accrued the remaining $5.1 million. However, there can be no assurance that the court will approve the proposed settlement or that the settlement will be consummated on the term described or at all. Additional information is included in our form 10 q under note 16, commitment and contingencies. Research and development expenses for the quarter increased by $605 thousand or 78% compared to the same period in 2025. The increase was primarily due to an increase in labor costs as we expanded our investment into new product development. Selling and marketing expenses for the 3 months decreased by $1.4 million or 23.9% compared to the same period in 2025. The decrease was primarily due to lower personnel costs. Additionally, noncash impairment charges of long lived assets of $35.7 million for the quarter, primarily driven by $15 million $4.4 million and $16.3 million impairment losses for the operations in China, Germany and The U. S, respectively. This impairment amount was a result of impairment testing for all production line assets and construction and progress assets triggered by the material decline in sales, gross margin, and operating performance during Q3 2020 6. We reported a GAAP net loss of $76.8 million for the quarter After adjusting for non cash expenses such as stock based compensation of $800 thousand we recorded an adjusted net loss of $76 million compared to an adjusted net profit of $11.9 million last year. Non GAAP adjusted EBITDA was negative $60.8 million in Q3 2020 compared to non GAAP adjusted EBITDA of $21.9 million in Q3 2020 5. Our revenues for the 9-month period decreased by $137 million or 41.5% compared to the same period in 2025. The decrease was primarily driven by 37.4% reduction in sales volume from approximately 1.45 thousand megawatt hours for the 9 months ended September 30, 2025 to approximately 907 megawatt hours for the same period in 2026. Our gross profit margin was 24.4% for the 9 months compared to 36.6% in 2025. This change was primarily attributable to a $11.1 million write down for obsolete inventories related to specialized ESS components and other inventories. Which negatively impacted our gross margin by 5.7 percentage points. Excluding the impact of this noncash charge, the decreased gross margin reflects significant reduction in sales volume, changes in geographic markets, and continued price pressure in the lithium battery industry. Substantial decrease in revenue also reduced the absorption of the fixed costs, operating costs, further compressing gross margin. These declines in revenue and gross margin for the year to date period stem from the same factors noted for the quarter as well as the $2.7 million in tariff refund issued to U. S. Customers, which were reported as a reduction to our revenue in the current period. Operating expenses increased to $124 million for the year-to-date period compared to $84.4 million in 2025. A 46.5% increase year over year. General and administrative expense for the 9 month period increased by $4.1 million or 9.6% compared to the same period in 2025. This increase was primarily due to the provision of $5.1 million for litigation settlement, a $684 thousand increase in share based compensation expenses, and a $976 thousand increase in insurance fees. Partially offset by a $1.3 million decrease in labor costs and a $2.7 million decrease in the allowance for credit loss due to improved credit management. Research and development expenses for the 9 month period increased by $2.3 million or 9.7% compared to the same period in 2025. The increase was primarily due to a $2 million increase in labor costs as we expand our investment in new product development. Selling and marketing expenses for the 9-month period decreased by $1.6 million or 9.7%. Compared to the same period in 2025. The decrease was primarily due to a $1.4 million decrease in labor costs. Non cash impairment charges of the long lived assets was $35.8 million for the 9 months period, primarily driven by about $15.1 million $4.4 million and $16.3 million impairment loss for operations in China, Germany, and The US. Respectively. We reported a GAAP net loss of $40.6 million for the 9 month period For the 9 months, non GAAP adjusted net loss was $96 million compared to non GAAP adjusted net profit of $47.5 million in the prior year period. Non GAAP adjusted EBITDA of negative $62.7 million compared to non GAAP adjusted EBITDA of $76.3 million in the prior year. Reconciliations of non GAAP metrics to the most comparable GAAP metrics is included in the tables at the end of our slide presentation and our earnings press release. Please turn to Slide 5 where we will review our revenue by region. US sales decreased year over year, primarily driven by a large customer bringing product into 2025. Due to the uncertainty around tariff outcomes. US revenue was $4.5 million for the quarter, a decrease of 31% compared to $6.6 million in the prior year period. For the 9 month period, US revenue was $3 million a decrease of 82% compared to $17.8 million in the prior year period. Reflecting in part $2.7 million reduction related to tariff refunds in Q2 Before that reduction, US revenue for the 9 month period was $5.7 million European sales were $27.8 million in the quarter, a decrease of 64% compared to 77.9% in the prior year period. The region accounts for 60% of quarterly revenue versus 64% last year. Year to date sales were down 30% to $124 million compared to $177 million in the prior year period. The decline reflected softer end market demand, which led to reduced orders from several of our long standing customers in the region. APAC sales were $13.5 million in the quarter, a decrease of 65% compared to $38.8 million in the prior year. Year-to-date sales decreased 51% to $107 million from $137 million in the prior year period. In addition to the softer end market demand and reduced orders from long standing customers previously noted APAC demand continued to be adversely affected by evolving commercial vehicle regulatory and geopolitical dynamics. Including the Indian and Korean markets and demand shift towards lower cost products in India. Now turning to Slide 6, we will walk through the cash flow year to date. Net cash used in operating activities was $65.4 million for the 9 months compared to $59.5 million in cash generated by operating activities in the same period in 2025. The change was primarily due to $105 million reduction in net income after adjusting for noncash items and a $19.8 million change in operating assets and liabilities Changes in our operating assets and liabilities are primarily driven by the decreases in notes payable the decreases in accrued expenses and other liabilities, and an increase in inventory balance. Partially offset by a decrease in accounts receivable due to the improved credit management. Net cash used in investing activities was $5.6 million for the 9 months, compared to $15.5 million in the same period in 2025. This cash outflow consisted of $9.2 million for the purchase of an office building in Houston, $7.3 million for the acquisition of machinery and equipment, and other capital expenditures related to the expansion of our Huzhou phase 3.2 manufacturing facility, partially offset by $10.8 million in proceeds for the sale of our facility in Lake Mary, Florida, which is classified as held-for-sale assets. Before disposal. Net cash generated by financing activities was $23.3 million for the 9 months an increase of $32.8 million compared to the $9.5 million used in the same period in 2025. The increase was primarily due to $25.7 million increase in proceeds from bank borrowings, $10.9 million decrease in deferred payment related to purchase of property, plant, and equipment as majority of them are settled during the first quarter of 26, partially offset by a $6.1 million increase in repayments of bank borrowings. After accounting for foreign exchange adjustment of $3 million cash, cash equivalents and restricted cash decreased by $44.8 million and we ended the quarter with cash equivalents and restricted cash of $124 million Now I will hand it over to Mr. Wu to go over some operational and business updates.

Thank you. As our financial results detail, the third quarter presented a highly challenging operating environment for Microvast. We navigated softer Commercial Vehicle Demand Across Our Key Markets in the Europe and Asia Pacific region. Which was compounded by ongoing industry pricing pressures. While these extended macroeconomic headwinds, led to a material decline in our top line revenue and operating performance. Our team is intensively focused on the variables within our control. Cost containment, protecting our liquidity, addressing our significant and near term debt maturities, and advancing our strategic production milestones. Regarding our manufacturing roadmap, installation, and commissioning of phase 3.2 production equipment, at our Huzhou, China facility have been completed. Production ramp up depends on the customer demand. Production yields, production qualification, operating efficiency, and working capital availability. Unless production volumes increase significantly, the phase 3.2 line will operate below its design capacity. In the United States, the pack assembly line at our Clarksville facility is substantially completed. Resumption of full-scale construction at the facility remain contingent upon additional financing and the strategic partnerships. Next, I would like to go over some of our latest updates in research and development. Please join me on slide 8. Despite the financial challenges, we continue to make measured progress in research and development. These technologies remain under development. However, the laboratory results did not establish commercial readiness. In our solid state program, we have advanced our electrolyte-free architecture under laboratory conditions our 70 layer bipolar prototype successfully delivered approximately 72 V and achieved a specific energy of 366 watt hour per kilogram. In extended testing, a long cycle development cell retained over 79.5% of its capacity after more than 1.3 thousand cycles. At 0.33 c. Our solid-state batteries are currently at the early stage prototype stage. The results I have described are preliminary research and development data from separate-layer prototypes obtained under limited laboratory or test conditions. They are not commercial qualification results and remain subject to further validation. Repeat testing, scale up, customer qualification, manufacturing readiness, and the capital availability. And finally, on slide 9, we are also advancing our silicon-sulfur chemistry. Our early laboratory prototypes paired a sulfur-based cathode with a prelithiated silicon-based anode. A 5 layer bipolar prototype study demonstrated that the expansion of the cathode is partially offset by the contraction of the anode during discharge. We are evaluating this internal dimensional compensation as a potential pathway to monolithic integration in higher voltage solid state assemblies. Our silicon sulfur chemistry is currently at a early laboratory prototype stage and these results are preliminary and subject to the same further validation testing scale up qualification, and manufacturing readiness and capital requirements. Please turn to slide 10. In light of the uncertainty regarding our liquidity position, our ongoing discussion with our lender regarding the refinancing extension or restructuring of our near-term debt obligations, and softer end-market demand our near term priorities are centered on controlling cost preserving liquidity, addressing our significant near term debt maturity, and stabilizing our operations. We are implementing operating cost reduction initiatives across all areas of the business. Reducing and deferring certain discretionary capital expenditures and implementing targeted reduction in workforce in certain of our operations. Our cost reduction program has not been fully implemented. and the cash costs associated with this program have and may continue to strain our near term liquidity. In conjunction with our efforts to stabilize our business, we are exploring all potential options to address our liquidity position, including potential asset sales. And we are engaged in negotiations with our lenders to refinance, extend, or restructure our near-term debt obligations. No assurance can be made that those negotiations will be successful. We continue to explore potential near term opportunities in the commercial vehicle market. Our team is actively navigating this difficult global macroeconomic environment. And we remain focused on executing our revised business plan to preserve our liquidity. There can be no assurance that those efforts will be successful. And as disclosed in our form 10 q, substantial doubt about our ability to continue as a going concern has not been alleviated. Thank you for your continued support. We look forward to sharing further updates in the months ahead.

This concludes the webcast. Thank you for joining the Microvast Third Quarter 2026 Earnings Call. You may now disconnect.