Thank you for standing by. This is the conference operator. Welcome to the Microvast Second Quarter 2022 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Sarah Alexander, Microvast General Counsel. Thank you. Please go ahead.

Thank you, John, and thanks to the audience for joining us today. Sascha Kelterborn, our President and Chief Revenue Officer; and Craig Webster, Chief Financial Officer, will host today's call. Ahead of this call, Microvast issued its second quarter 2022 earnings press release, which can be found on the Investor Relations section of our website at ir.microvast.com. In addition, we have posted a slide show to our website to accompany tonight's call. As a reminder, please note that we will be making forward-looking statements on this call. These statements are based on current expectations and assumptions and reflect our views only as of today. They should not be relied upon as representative about views as of any subsequent date and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our annual report on Form 10-K filed in March and the 10-Q filed earlier today. In addition, during today's call, we may discuss non-GAAP financial measures, including adjusted gross profit, adjusted net loss and adjusted EBITDA, and which we believe are useful as supplemental measures of Microvast's performance. These non-GAAP 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 their most comparable GAAP metric in the tables included at the end of our press release. A webcast replay of this call will also be available on the Investor Relations section of our company website. With that, I'll turn the call over to Sascha for some opening remarks.

Thank you, Sarah. Everyone, please turn to Slide 4 of our presentation as I cover a few highlights from the second quarter. We posted 93% revenue growth during the quarter, delivered USD 64.4 million in Q2 2022. This revenue performance exceeded expectations, especially considering that our shipments, they were very slow in April and the first half of May as a result of the COVID lockdowns in Shanghai and the surrounding region. I want to thank our global team and especially our local team in China this quarter, faced with many external challenges and situations that were out of their control they rose to the occasion, maintaining production throughout the lockdown and put us in a position to deliver strong quarterly results after the pace of shipments begin to pick up -- pick back up in the second half of May when the lockdown restrictions were eased. We had an outstanding month in June, and we were able to make up the shortfall from the first half of the quarter. On a regional note, I would highlight that our market share in India continues to increase, and it was again a key region for our revenue growth this quarter. We ended the second quarter with a strong backlog of USD 105.3 million, driven by a healthy order intake of USD 47.8 million. Our forecasted contracted revenue remained at a solid USD 2.5 billion. Except backlog, our forecasted contract revenue is compromised entirely of customers located outside of China. When we refer to forecasted contract revenue, we are describing backlog plus management estimate for revenue we expect to realize from existing contract relationships with customers. Most of these contracts include estimate volumes requirements. However, they do not typically include a volume commitment. We expect to realize current forecasted contract revenue figures…

Thank you, Sascha. I'll spend the next few minutes discussing our Q2 2022 financial results. Please turn to Slide 8, and I will summarize the main line items from our Q2 P&L. First off, revenue. I am pleased to report strong revenue growth in the second quarter, which grew 93% to $64.4 million from $33.4 million in Q2 2021. I will take you through the geographic breakdown in a later slide, but I would like to highlight that this marks the sixth quarter in a row that we have shown substantial revenue growth over the same quarter in the prior year. In fact, on a percentage basis, revenue has grown double or triple digits for each quarter since Q1 2021. On a year-to-date basis, revenue was $101.1 million, up 109.2% from $48.3 million in the prior 6-month period. We posted gross profit of $4.8 million in Q2 2022 compared to gross loss of $6.8 million in the prior period, an improvement of 171.5%. After adjusting for noncash settled share-based compensation expense in our cost of sales, adjusted gross profit was $6.7 million in Q2 2022 compared to adjusted gross loss of $6.8 million in Q2 2021. This translates into an adjusted gross margin of 10.4% in Q2 2022 compared to negative 20.3% in Q2 2021, a 30.7 percentage point improvement. I was pleased to see gross margin improve at a faster rate than revenues during the quarter despite higher raw material prices. This result underpins our efforts to improve our gross margin performance long term, and it will continue to be an area of focus for us going forward, especially as we plan for significantly higher customer deliveries in 2023. Operating expenses were $50.4 million in Q2 2022 compared to $15.8 million in Q2 2021. The largest contributor to the…

Thanks, Craig. Please turn to Slide 13. We are reaffirming our guidance of 35% to 45% revenue growth compared to 2021. We continue to be optimistic about opportunities to grow forecasted contracted revenue this year from its current level of $2.5 billion, and are looking forward to the full deployment of our newly launched products to further drive global sales growth, including nearby markets. Accordingly, we have a good visibility on 2023 as a result of 2 large SOP projects for deliveries to our customers in Europe, which we currently estimate at $80 million in revenue with potential upside. We are, therefore, planning for a sustainable increase in customer volumes next year and which truly sets the platform for future years of growth. Executing is critical and to achieve our targets, we will continue to focus our efforts on revenue growth through new multiyear supply contracts with existing as well as new customers to fill the new capacity coming online in 2023, completing the capacity expansion projects to serve increasing customer demands and throughput, driving margin improvements as we scale the business model. We recently established a new subsidiary in Denver, Colorado, called Microvast Energy, Inc. and have begun building a dedicated team to focus on energy storage solutions, which we see as a huge growth opportunity, especially in the U.S. market. We believe energy storage is an attractive end market for our new 53.5 ampere-hour cells. Energy storage was valued at over EUR 10 billion in 2020 and is projected to globally reach over EUR 37 billion in 2027. Further, we expect the U.S. Inflation Reduction Act of 2022 to be important legislation advancing clean energy initiatives and helping to reduce carbon emissions in the U.S., helping to create even more exciting direct and indirect business opportunities for Microvast going forward. In addition, I'm pleased to report that we have signed an LOI with a NASDAQ listed innovative e-mobility, commercial vehicle platform provider and are finalizing right now a strategic cooperation agreement with them. You will hear more about it. Finally, as many of you are aware, our annual stock meeting will help tomorrow at 9:00 a.m. central time. If you have not done so already, please vote your shares. The polls are open until midnight Eastern time tonight. And if you would like to meet some of us in person, please come to our booth at the IAA conference in Hanover, Germany in calendar week 38. Full details are on the IAA website. I will now turn the call back to Sarah.

Thank you, Sascha. The operator will now tune in to moderate the question-and-answer session.

[Operator Instructions]. Our first question comes from the line of Colin Rusch with Oppenheimer.

Can you talk a little bit about how involved your customers are in helping source some of their raw materials? Obviously, there's a very dynamic environment. It's very competitive. I'm curious about how active they are in leveraging some of their purchasing power to help you guys with the supply chain?

Colin, thanks a lot for that question. It's a very valid question. Yes, we are involved in our -- with our customers together in our strategic partnerships. As you know, we have a strategic partnership with FPT and the . We are involved in finding solutions, joint solutions in acquiring raw materials, other materials on the market jointly together in order to have a better bargain power. This is what we do as an example. We do that also with other strategic customers in order really to narrow down the risk of having further increasing raw material prices.

Excellent. And if you look across the potential customer landscape and you guys did a nice job of booking some new business this quarter. How many new folks are working through qualification right now that you might be able to convert over the next, call it, 3 to 6 months?

We have various customers or potential customers we are working on right now. We're in -- a quick turnover in 3 to 6 months is always difficult to say because we are an automotive industry. This means we have normally a summer and the winter test, an A sample, a B sample and the C sample in case it is a dedicated solution for customers. Otherwise, if it's in already existing solutions, this goes quicker. So this means we have already, I would say, at least 10 customers in alignment, which will -- where we will see revenue upcoming within the next 3 to 6 months.

Great. And then one of the things that we're seeing pretty substantially as we move away from fossil fuels into electrification of a variety of applications, there's an enormous amount of demand coming around energy storage and certainly a variety of supply constraints. Can you talk a little bit about the variety of applications you guys are considering right now from end markets and the inbounds that you're getting from potentially new customers?

We will stay with our strategy. So one of our most important markets you see commercial vehicle applications, which means everything from 3.5 tons all the way to 100 tons. And then on the energy storage side, we will further go, do further deep dives into that topic. We have the technology on hand, so we do not need to develop anything new. We are in deep discussions right now with a couple of customers in regards to energy storage solutions, and we will further later, do have a further rollout in that market as well. So we are happy that it's now supported by the government, and we will further deep dive into these different markets. Not only in the U.S. but also in Europe and other regions in Asia because everywhere you we see big potential on the energy storage as well as in the commercial vehicle field.

And our next question comes from the line of Mike Shlisky from D.A. Davidson.

I wanted to ask about the mechanisms regarding your raw material costs. When you look -- go with companies like away of some of those larger companies that you've been talking about. They often have contractual clauses, which will allow you to raise your prices if raw materials hit certain levels. Oftentimes, there's a 30- to 90-day lag, but there is a way to pass it along, and it's pretty much in writing. Is that what you're experiencing in your current contracts? Can you tell us a little bit about how you'll be able to pass along pricing that's not in your contract?

Mike, it has to be contractual. So if we're in an existing program with a customer, we can only pass that on if it's per the contract. Now in a number of our multiyear contracts, that provision is in there. What we're faced with next year is that we're starting new production for new cells. So at this point, we don't know if we are in a price increase position. What we need to do is deliver per those contracts for at least a quarter. And then we see whether unit costs come out versus what was in the -- what's in our pricing terms. And if there's an escalation event, then we'll talk through that with a customer. But we have to remember these are long-term partnerships, and it's got to work for everybody that we're making money and also they're making money.

Got it. Yes. That makes sense. And I wanted to just touch also on the mix you have between hydrogen and battery power, I guess, just in general, but hydrogen trucks and battery-powered trucks. Do any of those vehicles in the hydrogen space have a different mix as far as how much you can make per vehicle? They're often using a smaller battery because of the hydrogen system. Will there be any kind of mix issue as you start to ship one contract versus or another? Or do you feel like you'll have pretty consistent gross margins quarter-over-quarter and it doesn't matter whether a hydrogen or a BEV is what you're shipping to?

Mike, to give you an answer, I think hydrogen is a technology which is upcoming right now. It started in Europe. It will -- it is quickly picking up. It's also now picking up in the U.S. market. So -- but it's in the start-up phase. So you have various mixtures, you have hybrid trucks, you have full electric trucks, you have hydrogen trucks. So at the end of the day, we have a good mixture in-between. So when we deliver -- and hydrogen is mainly used for long distance. And yes, you can -- you have a smaller battery in there, but you need a special battery in there which is fast-charging capable. So with high C rates. So then you can use a smaller battery compared to other suppliers. We tested our battery solution on a hydrogen truck just recently. It went through the desert. We made that announcement and everything was fine. We performed perfectly. So this gives us also a solid base for our technology, battery technology for hydrogen trucks. And I think all 3 technologies, if it's a hybrid, if it's a hydrogen or battery -- full you will see them in the market long run. So hydrogen, for sure, until 2035 as an example, because you can reach longer distances as long as you have not enough fast-acting stations available for commercial vehicle applications as an example.

At this time, we have reached the end of the question-and-answer session. And I would now like to turn the call back over to Sascha for any closing remarks.

Thanks a lot. Thanks for your time, everybody. I wish everybody a peaceful, relaxing evening and thanks a lot again for participating in our Q2 call. Thanks.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.