Microvast Holdings, Inc. Q2 FY2026 earnings call

Overall Financial Performance

• Q2 2026 total revenue was $87.3 million, a 4.5% year-over-year decrease, with the decline primarily driven by a $2.7 million customer tariff refund recorded as a revenue reduction.
• Q2 2026 gross profit was $25.8 million with a 29.5% gross margin, down from 34.7% in Q2 2025. The margin decline stems from higher raw material prices and lower production utilization reducing fixed cost absorption, partially offset by the tariff refund impact.
• Operating expenses rose 16.1% year-over-year to $27.5 million in Q2 2026: general and administrative expenses increased 24.2% (driven by a $2.6 million rise in legal/professional fees), R&D expenses increased 14.8% (driven by higher labor costs for new product development), and selling/marketing expenses increased 38.5% (driven by higher customer retention service fees, partially offset by lower personnel costs).
• GAAP net loss was $12 million for Q2 2026; adjusted for non-cash items, adjusted net loss was $5.3 million (compared to an adjusted net profit of $16.3 million in Q2 2025), and non-GAAP adjusted EBITDA was $3.6 million (down from $25.9 million in Q2 2025).
• For the first half of 2026, total revenue decreased 28.8% year-over-year, gross margin fell to 30.4% from 36%, non-GAAP adjusted EBITDA was negative $1.9 million (down from $54.4 million in the prior year period), and the company ended Q2 with $143.1 million in cash, equivalents, and restricted cash.

Manufacturing Expansion Updates

• Huzhou Phase 3.2 manufacturing facility equipment installation and commissioning is complete. Production capacity is ramping up, with start of production (SOP) expected in 2026. The expansion will add 2 GWh of annual production capacity, designed to be modular for the firm's large battery cell platform.
• The pipeline assembly facility in Clarksville, Tennessee remains on schedule for initial output by the end of 2026. Full-scale battery plant construction at the site is contingent on securing additional financing or strategic partnerships.

Research and Development Milestones

• The company achieved a new development milestone for its series-connected bipolar solid-state cell architecture, successfully scaling a 17-layer monolithic zero-liquid-electrolyte prototype that delivers 72 volts. The prototype retained 88.5% of capacity after 200 test cycles, with verified uniform multi-layer construction that validates the stability of the high-voltage solid-state platform, targeted at robotics applications.
• Solid-state cell prototypes passed extreme thermal safety testing: no ignition or smoke was observed in hotbox testing up to 200°C, and the internal electrode structure remained largely intact after high-temperature internal shock.
• Early development of all-solid-state silicon-sulfur cells (pairing a sulfur cathode with a silicon anode) achieved an initial specific capacity of over 1,000 mAh per gram, retaining over 90% capacity after 15 cycles. The firm's unique bipolar design self-compensates for volume changes during cycling to mitigate contact loss, enabling high energy density without external compression hardware, targeted at commercial and defense drone applications.

Strategic Priorities

• Core strategic priorities for the second half of 2026 are accelerating the path to profitability, scaling with margin discipline, and expanding into high-barrier heavy industry and transit markets.

This call reports regional revenue performance rather than product segment performance:

1. U.S. Region: Revenue decreased year-over-year, driven by a $2.7 million tariff refund recorded as a current-period revenue reduction, and front-loaded purchases by the firm's largest customer in 2025 due to tariff uncertainty. $0.9 million and $1.2 million of the refund reduced Q2 2026 and year-to-date 2026 revenue respectively.
2. Europe: Q2 2026 revenue increased 35% year-over-year, and the region accounted for 61% of total quarterly revenue, up from 43% in Q2 2025. Year-to-date revenue was down 3% due to prior-quarter customer platform rollout delays.
3. APAC: Q2 2026 revenue declined 23% year-over-year, and year-to-date revenue fell 45% year-over-year. This underperformance is primarily attributed to shifting regulatory and geopolitical dynamics, and a regional demand shift toward lower-cost products in India.

Management did not issue formal revised or updated full-year financial guidance. Key forward-looking statements include:

• Huzhou Phase 3.2 is on track to reach start of production (SOP) in 2026, with full ramping of 2 GWh of annual modular production capacity to meet next-generation battery demand later in the year.
• The Clarksville, Tennessee pipeline assembly facility is projected to deliver initial output by the end of 2026.
• The company will continue to provide updates on R&D program progress for new solid-state battery technologies in coming months.

Management disclosed the following key risks and uncertainties:

• Forward-looking statements about future operational and financial performance are based on current expectations, and actual results may differ materially due to a range of known and unknown risks; additional detail on material risk factors is available in the company's SEC filings.
• Full-scale construction of the Clarksville, Tennessee battery plant is contingent on successfully securing additional financing or strategic partnerships, with no guarantee these will be obtained on acceptable terms.
• Sustained lower production utilization increases fixed cost per unit and puts downward pressure on gross margins, driven in part by softening regional demand and customer purchase timing shifts.
• APAC market performance is negatively impacted by ongoing shifting regulatory and geopolitical dynamics that create uncertainty for sales.

The question and answer segment was not held on this call; the prepared remarks section concluded and the call was adjourned immediately after management's presentation.