Microvast Holdings Inc Stock

Thank you for standing by. This is the conference operator. Welcome to the Microvast Second Quarter 2026 Earnings Call. [Operator Instructions] This conference is being recorded.

I would like to turn the conference over to the Microvast Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining our update today. This is Rodney Worthen, Chief Financial Officer of Microvast. And with me on today's call is Mr. Yang Wu, Founder, Chairman and Chief Executive Officer of Microvast.

I'll start off with a review of the second quarter results before handing it to Mr. Wu to provide some operational and business updates. Ahead of this call, Microvast issued its second 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. These statements are based on current expectations and assumptions and should not be relied upon as representative of our views for 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, please refer to our filings with the SEC.

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 our earnings press release and the slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast's website.

Please join me on Slide 3, which details the results for the second quarter over the past several years. Our revenue for the quarter was $87.3 million, a decrease of $4.1 million or 4.5% compared to the same period in 2025. The decrease was primarily driven by a $2.7 million tariff refund issued to a customer, which was recorded as a reduction to our revenue in the current period. Gross profit for the second quarter was $25.8 million, with a gross margin of 29.5% compared to 34.7% in Q2 2025. The decrease in gross margin was primarily due to higher raw material prices and lower production utilization, which reduced fixed cost absorption, slightly offset by recognition of the tariff refunds.

Turning to Slide 4 to view our P&L for the quarter and year-to-date. Let's jump to the operating expenses, which increased to $27.5 million for the quarter compared to $23.7 million in 2025, a 16.1% increase year-over-year. General and administrative expenses for the 3 months increased by $2.7 million or 24.2% compared to the same period in 2025. This increase was primarily due to a $2.6 million increase in legal and other professional service fees.

Research and development expenses for the second quarter increased by $1.1 million or 14.8% compared to the same period in 2025. The increase is primarily due to increase in labor costs as we expanded our investment in new product development. Selling and marketing expenses for the 3 months increased by $1.3 million or 38.5% compared to the same period in 2025, this increase was primarily due to a $1.5 million increase in service fees associated with customer retention initiatives, partially offset by a decrease in personnel costs.

We reported a GAAP net loss of $12 million in the quarter. After adjusting for noncash expenses, such as stock-based compensation expense of $0.8 million and fair value changes of our warrant liability and convertible loan of $5.8 million, we recorded an adjusted net loss of $5.3 million compared to an adjusted net profit of $16.3 million last year. Non-GAAP adjusted EBITDA was $3.6 million in Q2 2026 compared to non-GAAP adjusted EBITDA of $25.9 million in Q2 2025.

For the 6-month period, revenue decreased by $60 million or 28.8% compared to the same period in 2025, the decrease was primarily driven by a 24.3% reduction in sales volumes from approximately 947 megawatt-hour in 2025 to approximately 717 megawatt-hour for the same period in 2026, and a $2.7 million tariff refund issued to a customer, which is recorded as a reduction to our revenue in the current period.

Gross profit margin was 30.4% for the 6 months compared to 36% in 2025, the decrease in gross margin was primarily due to higher raw material prices, lower production utilization, which reduced our fixed cost absorption, slightly offset by recognition of the tariff refunds. Operating expenses increased to $54.6 million for the year-to-date period compared to $52.9 million in 2025, a 3.3% increase year-over-year.

General and administrative expenses for the 6 months increased by $1.5 million or 6%, compared to the same period in 2025. This increase is primarily due to a $4 million increase in legal and other professional service fees, partially offset by a $3.1 million decrease in allowance for credit loss due to improved credit management.

Research and development expenses for the 6 months increased by $1.7 million or 10.7% compared to the same period in 2025. The increase was primarily due to a $1.4 million increase in labor costs as we expand our investment in new product development. Selling and marketing expenses for the 6 months decreased by $138,000, which was stable compared to the same period in 2025.

We reported a GAAP net profit of $36.2 million for the 6-month period. For the 6 months, non-GAAP adjusted net loss was $19.9 million compared to non-GAAP adjusted net profit of $35.6 million in the prior year period. Non-GAAP adjusted EBITDA of negative $1.9 million in the 6-month period compared to non-GAAP adjusted EBITDA of $54.4 million in the prior year. Reconciliations to these non-GAAP metrics to the most comparable GAAP metrics are included in the table at the end of this presentation and our earnings press release.

Please turn to Slide 5, where we'll review our revenue by region. U.S. sales decreased year-over-year, primarily driven by both a $2.7 million tariff refund issued to a U.S. customer recorded as a reduction to our revenue in the current period and by our largest customer, bringing product into 2025 due to uncertainty around the tariff outcomes. For the revenue reduction of the tariff refund, a total of $0.9 million and $1.2 million revenue was realized for the 3- and 6-month periods, respectively.

European sales increased 35% in the quarter compared to prior year period. The region accounted for 61% of quarterly revenue, up from 43% last year. Year-to-date sales were down 3%, impacted by customer platform rollout delays in the previous quarter. APAC sales declined 23% in the quarter compared to the prior year period, with the year-to-date sales down 45%. The reduced sales performance in APAC is primarily due to shifting regulatory and geopolitical dynamics and a demand shift towards lower-cost products in India.

Now turning to Slide 6. We'll walk through our cash flow performance for the year. Net cash used in our operating activities was $33.3 million for the 6 months ended June 30, 2026, a decrease of $77.6 million compared to $44.3 million generated by operating activities in the same period in 2025. This change was primarily due to $60.6 million reduction in net income after adjusting for noncash items and a $17 million net change in operating assets and liabilities. The changes in our operating assets and liabilities were primarily driven by a; decrease in notes payable and an increase in inventory balances, partially offset by a decrease in accounts receivable due to improved credit management.

Net cash used in investing activities was $3.3 million for the 6 months ended June 30, 2026, compared to $5.1 million in the same period of 2025. This cash outflow primarily consisted of the purchase of our office building in the U.S. and capital expenditures related to the expansion of our Huzhou Phase 3.2 manufacturing facility, partially offset by the proceeds from the sale of our held-for-sale assets.

Net cash generated by financing activities was $8.2 million for the 6 months, an increase of $15 million compared to $6.8 million used in the same period of 2025. The increase is primarily due to a $9.8 million increase in proceeds from bank borrowings, $7.4 million decrease in deferred payment related to purchase of property, plant and equipment, the majority of them were settled during the first quarter of 2026. This was partially offset by a $4.6 million increase in repayments of bank borrowings. After accounting for foreign exchange adjustment of $2.3 million, our cash decreased by $26.2 million, and we ended the quarter with cash, cash equivalents and restricted cash of $143.1 million.

Now I'll hand it over to Mr. Wu to go over some operational and business updates.

Hello, everyone. Thank you for joining us today. Please join me on Slide 8 for a quick operational update on our Huzhou Phase 3.2 expansion. Installation and commissioning of the production equipment is completed, with production capacity ramping up, we expect the SOP in 2026 and Phase 3.2 is expected to add up to 2 gigawatt-hour of annual production capacity and anticipated to be modular across our large battery cell platform.

Next, I'd like to go over some of our latest updates in research and development. Please join me on Slide 9. We have reached the next milestone with our development stage series-connected bipolar cell architecture. Under laboratory test condition, we have successfully cycled to a 17-layer monolithic stack that delivers approximately 72 volts, with 0 liquid electrolyte. In extended testing this prototype demonstrated durability retaining approximately 88.5% of its capacity after 200 cycles at 0.33C. Cross-sectional SEM imaging confirms a uniform multilayer construction, validating the stability of our high-voltage solid-state platform.

By delivering 72 volts, this architecture is primarily focused on robotics. Our design has the potential to eliminate heavy interconnects and electronics typically required to drive high torque robotic motors. Eliminating liquid electrolyte has the potential to provide a better thermal safety for human robot environments. While the compact monolithic design is intended to allow seamless integration into space-constrained robotic frame limbs and autonomous mobile platforms.

Slide 10 displays the safety is a core differentiator of our solid-state program. It controlled hotbox testing up to 200-degree Celsius, our prototype cell exhibited exceptional thermal stability with no ignition or smoke observed throughout the test. Even following the high-temperature internal short event, post-test disassembly showed the internal electrode structure remained largely intact, demonstrating the significant safety potential of eliminating liquid electrolytes.

And then finally, on Slide 11, we are seeking to expand our long-term technology platform by exploring ultra-high capacity chemistries, including an all-solid-state silicon-sulfur cell pairing a sulfur cathode with a silicon anode. Early laboratory prototype achieved initial specific capacity of over 1,000 milliampere-hours per gram, retaining over 90% capacity after 15 cycles. Crucially, our 5-layer bipolar design utilizes simultaneous cathode extension and anode contraction to self-compensate for volume change during cycling, mitigating contract loss and opening new paths for high energy density storage.

As illustrated in the SEM, call sections, during cycling, the 48-micron expansion of the cathode is closely offset by a 52-micron contraction of the anode. This internal strain neutralization maintains continuous physical contact across solid interfaces without requiring heavy external compression hardware. For targeted applications like commercial and defense drones, eliminating external pressure fixtures while maximizing gravimetric energy density can potentially translate directly into extended flight endurance, higher payload capacity and a seamless integration into lightweight airframes. Stay turned for additional developments.

Please turn to Slide 12 as we transition into second half of 2026, our strategic priorities remain clear, accelerating our path to profitability, scaling with margin discipline, and expanding in high barrier heavy industry and transit markets. We are tightening operational execution to streamline the transition from R&D to production, protecting our gross margins and seeking to deploy targeted innovations like our KAF electric powertrain to ensure high-margin customer commitments. Operationally, Huzhou Phase 3.2 remains our central catalyst of 2026, with equipment commissioning progressing towards the serial production later this year to support next-generation cell demand. Domestically, pack line assembly in Clarksville, Tennessee remains on schedule for initial output by year-end. While full-scale battery plant construction at the site remains contingent on securing additional financing or strategic partnerships.

Overall, our team continues to navigate the global macro environment, and we remain focused on executing our milestones to drive long-term shareholder value. Thank you for your continued support. We look forward to sharing further updates in the months ahead.

This is the conference operator. This concludes the webcast. Thank you for joining Microvast Second Quarter 2026 Earnings Call. You may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to the Microvast First Quarter 2026 Earnings Call. [Operator Instructions] The conference is being recorded.

I would now like to turn the conference over to Microvast, Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining our update today. This is Rodney Worthen, Chief Financial Officer of Microvast. And with me on today's call is Mr. Yang Wu, Founder, Chairman and Chief Executive Officer of Microvast.

Mr. Wu will start off with a high-level overview of the first quarter results before providing some operational and business updates. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook, some closing remarks and to answer a few questions.

Ahead of this call, Microvast issued its first 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. These statements are based on current expectations and assumptions and should not be relied upon as representative of views for 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, please refer to our filings with the SEC. 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 comparable GAAP metrics in the tables included at the end of our press release and the slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast's website.

Now I will turn the call over to Mr. Wu to kick things off.

Hello, everyone, and welcome. Thank you for joining us today. As always, I want to start by reminding you of our core mission. Founded in Texas in 2006, Microvast has grown into a global leader in advanced battery technologies with over 890 patents granted or pending and our electrified solutions successfully deployed worldwide. We are proud to contribute to the global energy transition, building a more sustainable future, one battery at a time. Innovation is core to our operations and always on display at Microvast. And I'm excited to announce our next-generation 290Ah LFP-based battery packs as high-performance modular battery solutions designed for a wide range of commercial and heavy-duty industry applications.

We expect to integrate these new packs into the KAF electric powertrain solution. Microvast is on a mission to lower the barrier to entry for electric school bus platforms in the United States and reduce reliance on subsidies. We aim to deliver cleaner, quieter, affordable and more comfortable transportation for the next generation as we know that our kits today are the future. I will go into more detail about how we plan to transform the domestic school bus industry on the upcoming slides. But let's first take a brief look at the quarterly overview.

Please join me on Slide 4. Our first quarter revenue was $60.6 million, reflecting a unique set of challenges, which created a year-over-year dip that we believe to be temporary. Our focus remains on bringing on capacity from Phase 3.2 as production time lines align with customer demand, and we expect this capacity to contribute to a continued revenue ramp through 2026. Our gross profit margin was 31.6% and though total gross profit decreased due to lower volumes, margins remain resilient. This demonstrates effective cost management and our ability to maintain premium positioning despite fluctuations in our top line revenue. We expect some continued pressure from the Phase 3.2 ramp-up costs and the current raw material price increases, but aim to maintain a strong margin profile.

Let's turn to Slide 5 for an operational update on our Huzhou Phase 3.2 expansion. I am pleased to report that our Huzhou 3.2 expansion continues to progress well. The trial production for our 55Ah cell has been completed on the electrode section and the assembly and the formation equipment is currently undergoing material-based commissioning. The 2 images on the left display the electrode section in operation. While the 2 on the right show trial cells during assembly, we expect SOP in 2026 as this expansion is a critical component of our growth strategy. Phase 3.2 is expected to add up to 2 gigawatt hours of annual production capacity and is anticipated to be modular across our LBC platform.

Move to Slide 6. I'm tremendously excited to finally announce our 290Ah LFP battery pack and KAF electric powertrain. This product and end market has been one of my dream since the beginning of founding Microvast, and I cannot wait for it to hit the road. KAF is not just a battery system. It is a potential total solution to electrify a market that included nearly 0.5 million conventional school buses in the U.S. We would not just be handing OEMs a cell and pack, we would be handing them a plug-and-play electric powertrain that includes our high-voltage LFP packs, traction drivetrain and importantly, our proprietary nitrogen generation and storage system. This nitrogen inerting system aims to substantially reduce the risk of thermal propagation, addressing the #1 safety concerns school boards and parents have today.

For specific drivetrain components, we plan to partner with mature and high-volume suppliers to source and develop this integrated solution. From a business perspective, we expect our KAF powertrain solution will be market disruptor in a segment that has consistent recession-proof demand. Currently, electrical school bus can cost more than $350,000, facing school district to rely on lottery-based grants. By streamlining the powertrain integration as a total solution, we plan to leverage domestic LFP manufacturing in Clarksville and aim to eliminate this hurdle.

Our powertrain solution is targeting total cost of ownership parity with diesel buses for under 10 years without accounting for any government subsidies or for potential reduction in overhead and personnel required to maintain diesel counterparts. Our new battery pack will be the centerpiece of our presentation at the School Transportation News Expo or STN in July 2026. The American school routes need to be electrified, and we believe Microvast KAF solution is going to make it possible.

Now as we move to Slide 7, it is important to understand the environment of OEMs and school districts are operating in. On the left, you can see school district demand. School boards are facing intense pressure to reduce negative environmental impacts and reduce costs by replacing an aging diesel fleet that is becoming increasingly expensive to maintain. However, despite this strong interest in providing a cleaner, quieter, affordable and more comfortable transportation for our next generation, the transition has been largely stalled by 5 key deployment barriers that have made large-scale electrification nearly impossible for the average district.

The primary barrier is cost. As it stands today, electrical school bus remain materially more expensive than diesel alternatives. This upfront price gap is the primary barrier to entry. The second and third barriers are the infrastructure and the utility hurdles. Districts aren't just buying a vehicle. They are suddenly tasked with become electrical engineers. Between site-specific wiring, charging infrastructure and the long lead time for utility upgrades, the complexity of getting ready for the bus often exceeds the complexity of the bus itself.

The fourth barrier is funding uncertainty. The current market is trapped into a grant cycle mentality. Funding often involves shifting eligibility and complex reimbursement cycles created a stop and go purchasing behavior that prevent long-term fleet planning. The final barrier is the reliability of the fleet. Operationally, districts are concerned about winter, range, HVAC loads and the long-term health of the battery. They need to know that the bus will show up at 6:00 a.m. regardless of the temperature.

When these deployment hurdles aren't addressed, we see the consequence on the right, delayed or higher cost deployments. We see missed funding windows, fewer buses on the road and a slower realization of benefits for the students and the community. As you can see by the tagline at the bottom of slide, we believe that the winning solution must reduce the total deployment cost, simplify the charging infrastructure and above all improve operational confidence. The Microvast KAF electric powertrain solution is being built specifically to address those hurdles by working to develop and integrate a powertrain that is safer, cheaper and easier for OEM to integrate and deploy. We are aiming to remove the friction and accelerate the mission.

Now I will turn the call over to Rodney to discuss our financials.

Thank you, Mr. Wu. Please join me on Slide 9. Our revenue for the quarter was $60.6 million, a decrease of $55.9 million or 48% compared to the same period in 2025. The decrease was primarily driven by a reduction in sales volume from approximately 536 megawatt hours in the prior year period to approximately 274 megawatt hours for the same period in 2026, which will be detailed shortly. Our gross profit for the first quarter was $19.2 million with a gross margin of 31.6% compared to 36.9% in Q1 2025. The decrease was primarily due to lower production utilization with reduced fixed cost absorption and raw materials and energy price increases resulting from supply chain disruptions. However, even with these reduced sales volumes in the quarter, our margin position held strong, demonstrating the value of our technology. The gross margin profile remains subject to external pressures, including inflationary trends in raw material pricing and the elevated logistics and freight expenses resulting from the ongoing global supply chain disruptions and geopolitical conflicts.

The implementation of new tariff frameworks has also increased the cost of goods sold. While we continue to implement cost mitigation strategies, these macroeconomic factors, combined with the phaseout of regional subsidies for electric vehicle adoption have contributed to a challenging environment for near-term profitability across the battery manufacturing sector. Operating expenses decreased to $27.1 million for the quarter compared to $29.2 million in 2025, a 7.1% decrease year-over-year. General and administrative expenses for the 3 months decreased by $1.2 million or 8.3% compared to the prior year period. This reduction in G&A expenses was primarily due to $2.2 million decrease of allowance for credit loss due to improved credit management and $1 million decrease of employee costs, which is partially offset by a $1.5 million increase in professional service fees.

Research and development expenses for the 3 months increased by $0.6 million or 6.8% compared to the same period in 2025. The increase in R&D expenses was primarily due to the expansion of our domestic R&D presence in the United States. Selling and marketing expenses for the 3 months decreased by $1.5 million or 21.4% compared to the same period in 2025. This reduction in sales expense was primarily due to $1.3 million of decreased service fees. We reported a GAAP net profit of $48.2 million in the quarter. After adjusting for noncash expenses such as stock-based compensation of $1 million and fair value changes of our warrant liability and convertible loan of $63.8 million, we recorded an adjusted net loss of $14.6 million compared to an adjusted net profit of $19.3 million last year. Year-to-date, our adjusted EBITDA was negative $5.5 million compared to an adjusted EBITDA of $28.5 million in the prior year period.

Reconciliations of these non-GAAP metrics to the most comparable GAAP metrics are included in the tables at the end of this presentation and our earnings press release. In addition, as discussed in our Q1 2026 10-Q, we have recently shifted our priorities and resources towards certain new and upcoming commercial vehicle opportunities, such as our 290Ah LFP battery and integrated KAF powertrain solution, while we remain poised to increase activity in ASS in the future. Please turn to Slide 10, where we'll review our revenue by region.

During the 3 months, the company observed a moderation in global electric vehicle demand growth, primarily driven by the expiration of government incentive programs and shifting regulatory frameworks in key regions. Our revenue and delivery schedules were also impacted by broader macroeconomic headwinds, including geopolitical instability and evolving tariff structures, which contributed to market volatility and have influenced customer procurement cycles.

Now to discuss each region briefly, the decrease in U.S. sales versus the prior year period was due to our largest customer bringing product into 2025 as a result of uncertainty around tariff outcomes. Europe declined year-over-year, primarily due to OEM delayed rollout of platforms and production ramp-ups. The region accounted for 71% of our quarterly revenue, up from 52% last year. APAC revenue declined 66% year-over-year, primarily due to shifting regulatory and geopolitical dynamics impacting the Korean and Indian markets and the demand shift towards lower-cost products in India.

Now turning to Slide 11. We'll walk through our cash flow performance for Q1. Net cash used in our operating activities was $22.8 million, a decrease of $30 million compared to $7.2 million generated by operating activities in the same period of 2025. This decrease was primarily due to a $36.6 million reduction in net income after adjusting for noncash items, which was partially offset by a net $6.6 million improvement in net operating assets and liabilities. Net cash used in investing activities was $2.8 million compared to $2.3 million in the prior year period. This cash outflow primarily consisted of capital expenditures related to the expansion of our Phase 3.2 manufacturing facility and to the purchase of property and equipment associated with our existing manufacturing and R&D facilities.

Net cash generated by financing activities was $29.3 million, an increase of $19.8 million compared to $9.5 million in the same period of 2025. The increase is primarily due to $23.5 million increase in proceeds from bank borrowings and partially offset by $7.7 million increase in repayments of bank borrowings. Overall, after accounting for foreign exchange adjustment of $1 million, we had an increase in cash of $4.8 million. This resulted in a total cash, cash equivalents and restricted cash of $174 million at quarter's end.

Now I'll hand the call back over to Mr. Wu to go over our outlook.

Thank you. Please turn to Slide 13. As we move through the first half of 2026, we are executing on the strategic outlook we established at the start of the year, which remains consistent. Our focus remains centered on 3 primary objectives: accelerating our path to profitability, scaling with margin integrity and driving high-value market capture. The first pillar of our strategy is a disciplined transition to a cash flow positive state. We are working towards this goal by optimizing our R&D to production cycle and tightening operational execution across our global footprint. By streamlining the bridge between innovation and manufacturing, we are reducing the time to market for our latest technologies.

Secondly, we are scaling with margin integrity as we expand our battery manufacturing capacity to meet growing market demand. Our objective is to maintain a strong gross margin profile. We seek to achieve this through manufacturing excellence and by ensuring that our expansion does not come at the expense of operational efficiencies.

Finally, we look to drive high-value market capture. We are deploying our newest innovation into high barrier segments where our competitive advantages are most pronounced, specifically in heavy industries and transit. We believe this will allow us to accelerate revenue growth while focusing on most profitable opportunities. Operationally, the primary catalyst for the 2026 expansion continues to be our Huzhou Phase 3.2. We are currently in a ramp-up phase for SOP with serial production expected to follow later this year. This facility is essential for providing the capacity required to meet the demand for our next-generation cell technologies.

In the U.S., we are advancing with the ramp-up of our pack line assembly operation in Clarksville, Tennessee. This targeted investment in our Clarksville facility is to establish a pack assembly line, expanding our domestic capabilities and supporting anticipated customer demand. Resumption of full-scale battery plant construction activities at the site remains contingent upon securing additional financing and strategic partnerships. In addition to the KAF powertrain solution, our R&D team also continued to make progress on future products and platforms sought by customers. Those next-generation products are central to our ability to develop and maintain high-margin market opportunities and diversify our customer base into stable, high-value sectors.

To summarize, though Q1 has presented its challenges globally, it also reinforces our commitment to our core goals. We are navigating the current macro environment with a disciplined approach that aims to prioritize long-term value for our shareholders. Thank you for your continued support. We look forward to sharing further updates on our operational milestones in the months ahead. And now we will go over a few of investor questions we have received.

First question here. There's been a lot of activities surrounding the company's expansion efforts. Could you provide additional color on your manufacturing capacity?

Our current global operational capacity remains centered on our existing facility in Huzhou, which support our diverse cell chemistry portfolio and produced cell module and packs between our primary Huzhou lines, which produce 48Ah, 53.5Ah, 55Ah and 120Ah. Phase 3.1, which is in serial production and Phase 3.2, which is in ramping up, there is approximately 4 gigawatt hour of production capacity with our legacy lines contributing as needed for lower volume products and service needs in different formats.

Towards the end of 2025, we also made a targeted investment in our Clarksville facility to establish a pack assembly line. Additionally, we have pilot lines utilized for prototyping and testing and our German facility produced VA modules. Historically, our capacity has been weighted toward our high-power and multipurpose cell technologies to serve our core transit and industry customers. With the transition into 2026, we are increasingly pivoting our Huzhou allocation toward the next-generation cell production.

With the Huzhou Phase 3.2 expansion identified as your primary operational catalyst, could you provide a status update on the transition from trial to serial production? What are the final milestones required for full-scale deployment? And are we on track for the 2026 ramp-up time line?

Huzhou Phase 3.2 is our most significant operational milestone for the year. We have successfully completed the initial installation and are currently in the process of SOP ramp-up. The milestones required for full-scale series production involved the final calibration of assembly line and the completion of the internal quality validation for the high-volume output. We remain on track to move from trial production to full series production in 2026, which will significantly expand our capacity for next-generation cell technologies.

As you absorb the planned costs associated with the Huzhou Phase 3.2 ramp-up, how should we model gross margins? Are there efficiencies in 2025 that act as a primary hedge against these expansion costs? Protecting our gross margins is a top priority as we continue to scale with the Huzhou Phase 3.2 ramp-up naturally introduces some planned absorption costs, and we are offsetting these through operational efficiencies that we did establish in 2025. Our primary hedge is focusing on high barrier to entry segments and maintaining the disciplined approach with our R&D to production cycles. Though there is some near-term global turbulence, we do expect to maintain a strong margin profile even as we bring that new capacity online.

Next question. How should we view the cadence for 2026?

The Q1 revenue reflects a unique set of timing challenges. In the U.S., we saw the pull forward of deliveries into late 2025 due to the tariff uncertainty, which did create a year-over-year dip that we believe to be temporary. In APAC, specifically India, the market has pivoted toward lower cost solutions. Our strategy is not to race to the bottom on price, but to stay disciplined in our premium positioning where our technology's life cycle value is highest. We are focused on capitalizing on the electric mobility applications, including our 290Ah packs and the KAF powertrain and the new capacity from Huzhou Phase 3.2 to offset these regional headwinds.

As we anticipate production time lines for our next-generation cells to align with customer demand in the second half of the year, we do expect to see a normalized delivery schedule and a steady ramp-up.

And operator, I'll hand it back over to you.

Thank you. This is the conference operator. This concludes the webcast. Thank you for joining Microvast's First Quarter 2026 Earnings Call. You may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to Microvast's Full Year 2025 Earnings Call. [Operator Instructions] The conference is being recorded.

I would now like to turn the conference over to Microvast Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining our update today. This is Rodney Worthen, Chief Financial Officer of Microvast; and with me on today's call is Mr. Wu, Founder, Chairman and Chief Executive Officer of Microvast. Mr. Wu will start off with a high-level overview of our 2025 results before providing some operational and business updates. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook for 2026 and closing remarks.

Ahead of this call, Microvast issued its 2025 full year 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. These statements are based on current expectations and assumptions and should not be relied upon as representative of views for 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, please refer to our filings with the SEC.

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 their most comparable GAAP metrics in the tables included at the end of our press release and our slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast's website.

Now I will turn the call over to Mr. Wu to kick things off.

Hello, everyone, and welcome. Thank you for joining us today. As always, I want to start by reminding you of our core mission. Founded in Texas in 2006, Microvast has grown into a global leader in advanced battery technologies with over 890 patents granted or pending and our electrified solutions successfully deployed worldwide. We are proud to be a driving force in the global energy transition, building a more sustainable future, one battery at a time.

We are excited about our upcoming product launches. The 55 amp-hour cell combines the high-power performance of our 48 amp-hour cell with the high energy output of our 53.5 amp-hour cell, converging into a very exciting platform. We are also launching our next-generation LTO cell, which provides high-power output and ultra-fast charging capability. It's particularly well suited for rail and tram, specialty vehicles, high-torque applications and AGVs.

Join me on Slide 4, and I will provide a brief overview of our 2025 results. We are thrilled to achieve another year of record annual revenue of $427.5 million, representing a 12.6% year-over-year increase. While we navigated a shifting landscape, we delivered an annual gross margin of 28.6%. This change was primarily attributable to an inventory impairment charge, which negatively impacted our gross margin by 7.6 percentage points.

Our GAAP net loss for the year was $29.2 million. On a non-GAAP basis, we achieved an adjusted net profit of $13 million.

In 2025, we recorded a non-GAAP adjusted EBITDA of $44.7 million. This demonstrates that we are not only able to grow our top line, but also that we are making the necessary adjustments to leverage our operations as we continue to scale.

While our full year revenue landed just below guidance due to both evolving regulatory shifts in Korea market and the customer platform ramp-up delays, our underlying fundamentals remained strong. We delivered 2025 revenue growth at industry-leading gross margin, demonstrating the high value our customers place on Microvast technology.

The momentum in EMEA is encouraging as we continue into 2026, particularly as the previous vehicle platform delays in the region begin to resolve the -- reach SOP. In APAC, while we navigated a regulatory environment in Korea, we are focused on a long-term via our Huzhou Phase 3.2 expansion, which is expected to bring additional capacity online in 2026. We anticipate achieving serial production after the ramp-up period.

Our focus on efficiency and profitability is a long-term commitment. The growth we have seen from 2022 through 2025, where our revenue has more than doubled, our GAAP gross profit has gone up approximately 13x and we achieved positive adjusted EBITDA is a testament to the increasing market demand for our high-performance products. We believe this trajectory continue to validate our ability to successfully commercialize our innovative technology and operate effectively in a mature industry.

Let's turn to Slide 5 for an operational update on our Huzhou 3.2 expansion. I'm pleased to report that our Huzhou Phase 3.2 project is progressing well with clean rooms and utility equipment already in operation. Trial production for our 55 amp-hour cell has begun on the electrode section, assembly and formation, and no-load test has started. This expansion is a critical component of our growth strategy as Phase 3.2 is expected to add up to 2 gigawatt hour of annual production capacity and anticipated to be modular across our LBC platform.

Please turn to Slide 6 for a look at how our technology translates into market-leading applications. Whether our customers need maximum energy for long-haul duty cycles or ultra-high power for rapid charging, Microvast has a high-performance solution. On the left, our HpCO-55 amp-hour cell is a workhorse for high energy needs. It's purpose-built for segments where range and longevity are key. From city buses and heavy-duty trucks to maritime vessels, it delivers the energy density required to keep those fleets running longer between charges.

On the right, our HpTO-37 amp-hour cell leads in ultra-fast charging and high-power performance combined with long cycle life. This is the ideal solution for rail and tram systems, AGVs and high-torque robotics. These are environments where power must be delivered instantly and recharged rapidly to maintain 24/7 operations. By offering this specialized duality, we show that Microvast isn't just a battery supplier, but a strategic partner capable of electrifying the most demanding industry and commercial segments globally.

On Slide 7, let's look at the progress in our all-solid-state battery milestones. Building upon our Q3 updates, we are entering an exciting new phase of development focused on high-voltage bipolar integration. As shown in Figure 1, our 12-layer monolithic stack has now surpassed 200 cycles while maintaining a 99.97% Coulombic efficiency. This indicates minimal energy loss and validates the durability of full solid-state design.

Even more significant is our new milestone, a 72-volt monolithic stack. By using a proprietary internal series-connected bipolar architecture, we have achieved our highest stable voltage density to date as illustrated in Figure 2, voltage-capacity profile. This stack has successfully completed 100 cycles.

The cross-section analysis in Figure 3 confirms a uniform layer construction, which is essential for long-term power stability. By eliminating liquid electrolytes and external wiring, this architecture reduced weight and system complexity, making it ideal for direct integration into next-generation robotics and high-power system. These milestones show that potential to scale our high-voltage all-solid-state platform, one that maintains structural integrity under stress.

Now I will turn this call over to Ronnie to discuss our 2025 financials.

Thank you, Mr. Wu. Please join me on Slide 9. We are pleased to report that Microvast achieved record annual revenue in 2025, reaching $427.5 million, a 12.6% increase compared to the $379.8 million in 2024. This growth was primarily due to a year-over-year increase in our sales volume, approximately 16.5% or 266 megawatt hours.

While our fourth quarter revenue of $96.4 million was impacted by evolving regulatory changes in South Korea and customer platform ramp-up delays in EMEA, our full year performance highlights the transformation in our margin profile and business expansion.

Full year gross profit reached $122.1 million. This resulted in full year gross margin of 28.6% compared to 31.5% in 2024. This change was primarily attributable to $32.5 million in inventory impairment charge related to specialized ESS components, which negatively impacted our gross margin by 7.6 percentage points. Excluding the impact of the specific noncash charge, the underlying gross margin performance reflected a more favorable product mix and improved manufacturing efficiencies across our battery solution portfolio.

Full year operating expenses were $118.3 million compared to $238.3 million in 2024. General and administrative expenses for the year decreased by $23.7 million or 29% compared to 2024. The decline was primarily driven by $17.4 million reduction in share-based compensation expenses, or SBC, and a favorable $8.6 million impact from foreign exchange rate fluctuations related to the euro and RMB.

Research and development expenses for the year decreased by $7 million or 16.9% compared to 2024. This reduction in R&D expense was primarily driven by a $5.5 million decrease in SBC. Selling and marketing expenses for the year remained relatively flat compared to 2024, but overall decreased by $0.4 million or 1.7%.

In 2025, we reported an operating profit of $6.98 million and a GAAP net loss of $29.2 million. This is compared to an operating loss of $116.1 million and a net loss of $195.5 million in 2024. After adjusting for SBC of $3.1 million and fair value changes of our warrant liability and convertible loan of $39.1 million, we achieved non-GAAP adjusted net profit of $13 million for the full year 2025. This is compared to non-GAAP adjusted net loss of $84.6 million in 2024.

For 2025, we achieved non-GAAP adjusted EBITDA of $44.7 million compared to non-GAAP adjusted EBITDA of a negative $44.8 million in 2024, which shows an improvement in our operational performance year-over-year. Reconciliations of these non-GAAP metrics to the most comparable GAAP metrics are included in the tables of this presentation and our earnings press release.

Please turn to Slide 10, where we will review our revenue by region. U.S. revenue grew 173% year-over-year from $14.4 million in 2024 to $39.3 million in 2025, contributing to 9% of our total revenue mix. While the increase was primarily driven by customers bringing forward deliveries due to uncertainty on tariff outcomes, we continue to pursue and engage with new markets as we build our domestic customer pipeline.

EMEA remains our strongest growth engine with a 13% year-over-year revenue increase, growing to $211.9 million in 2025 compared to $187.7 million in 2024. This region again accounted for approximately half of our total revenue.

In Asia Pacific, revenue declined slightly from $177.7 million in 2024 to $176.3 million in 2025, a 1% year-over-year decrease. While we navigate the current regulatory landscape in South Korea, we remain focused on the long-term potential of the region via our capacity expansions.

Now turning to Slide 11. We'll walk through our cash flow performance for 2025. We generated a net positive operating cash flow of $75.9 million, a significant improvement compared to $2.8 million in 2024. The net loss for the year was primarily offset by $27.1 million decrease in inventory, noncash adjustments of $33.1 million in D&A, $38.3 million in impairment disposal and write-down and $39.1 million from changes in fair value of our warrant liability and convertible loan. This was partially offset by $54.6 million increase in net receivables and $11.1 million decrease in net liabilities and accrued expenses.

Net cash used in investing activities totaled $16 million in 2025, primarily from $19.8 million in capital expenditures towards our Huzhou 3.2 expansion line and partially offset by $3.8 million in asset disposals.

From financing activities, we used $2.7 million in net cash, which included $85.7 million in new bank borrowings and $28.8 million in gross proceeds from the sale of common stock, offset by $96.1 million in repayments and $18.9 million in deferred CapEx.

Finally, after recognizing $2.5 million in foreign exchange gain, we ended the year with a net increase in cash of $59.6 million, bringing our total cash, cash equivalents and restricted cash to $169.2 million as of year-end.

Now I will turn the call over back to Mr. Wu to go over our outlook for 2026 and closing remarks.

Thank you. Please turn to Slide 13. As we look ahead to 2026, we are entering a phase of business defined by strategic agility. While we expect continued revenue growth, our 2026 profile is being carefully assessed against a backdrop of evolving tariff structures and shifting geopolitical dynamics.

Our priorities remain clear, and we will continue to focus on high-margin deliveries. Our strategy is built on three actionable pillars: innovate, expand and capture. We are future-focused, expanding our portfolio with specialized products and services as we strive to define the industry benchmark for performance and efficiency. We are supporting growth by synchronizing our production increases with accelerating customer demand while continuously optimizing workflows to reach a cash flow positive state. We are pursuing market share by transitioning our validated technologies from a development to full-scale deployment in high-margin segments.

Ultimately, our forward strategy is clear: accelerate our path to profitability by optimizing R&D to production cycles and scale with margin integrity. We are aiming to strike a balanced approach with our industry-leading margins, one that maintains the operational efficiencies we fought hard for in 2025, while absorbing the planned costs associated with the ramp-up of our Huzhou Phase 3.2 expansion. This expansion remains our primary operational catalyst for the year. We are on track to achieve serial production in 2026. Phase 3.2 is a critical milestone that brings online the capacity necessary to meet upcoming demand for our next-generation cell technology.

Looking at our global pipeline, we continue to see robust interest across EMEA, North America and APAC. Our business development teams are focused on high barrier-to-entry segments, specifically heavy industrial and transit, where Microvast's vertical integration and technology provide a clear competitive advantage. Towards the end of 2025, we made a targeted investment in our Clarksville facility to establish a pack assembly line, expanding our domestic capabilities and supporting anticipated customer demand. Customer deliveries are expected from the pack line in 2026 and additional updates throughout the year are anticipated.

To summarize, our goals for 2026 remain set on three core objectives: achieving our production ramp-up milestones, protecting our margins despite macro volatility and diversifying our customer base into stable, high-value market. This disciplined approach is necessary for us to navigate near-term headwinds while continuing to build long-term value for our shareholders.

Thank you very much, everyone, for joining us today. While 2025 presented its share of challenges, it was also a year where Microvast proved its resilience, achieving record annual revenue and a significant shift toward profitability with new products and opportunity on the horizon. We look forward to updating you on our progress at Huzhou and our ongoing operational plans in the coming months.

Operator, that concludes our prepared remarks.

And this is the conference operator, and this concludes the webcast. Thank you for joining Microvast Full Year 2025 Earnings Call. You may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to the Microvast Third Quarter 2025 Earnings Call. [Operator Instructions] The conference is being recorded. I would now like to turn the conference over to Microvast Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining our update today. This is Rodney Worthen, VP of Corporate Strategy and Interim CFO. With me on today's call is Mr. Yang Wu, Founder, Chairman and CEO. Mr. Wu will start off with a high-level overview of the third quarter results before providing some operational and business updates.

I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook for the remainder of the year and closing remarks. 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 today.

As a reminder, please note that this call may include forward-looking statements. These statements are based on current expectations and assumptions and should not be relied upon as representative of views for 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, please refer to our filings with the SEC. 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 their most comparable GAAP metrics in the tables included at the end of our press release and slide presentation.

After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast's website. And now I will turn the call over to Mr. Wu to kick things off.

Hello, everyone, and welcome. Thank you for joining us today. As always, I want to start by reminding you of our core mission. Founded in Texas in 2006, Microvast has grown into a global leader in advanced battery technology with over 810 patents granted or pending and our electrified solution successfully deployed worldwide. We are proud to be a driving force in global electrification, building a more sustainable future, one battery at a time. Innovation is core to our operations and always on display at Microvast. Our commitment to innovation has delivered some major milestones. At Microvast, we will always strive to push the limits of what is possible.

Please turn to Slide 4, and I will give a brief overview of the quarter. We are thrilled to announce a record third quarter revenue of $123.3 million, which is an excellent 21.6% year-over-year increase. This increase was simultaneously with improving our gross profit margin to 37.6%, a 4.4 percentage point improvement from the same period last year. This demonstrates that we are not only able to grow, but also that we can achieve such growth efficiently. Our focus on efficiency and profitability is continuing to pay off. I'm pleased to report that we achieved an operating profit in the third quarter of $13 million (sic) [ $13.2 million ] with an adjusted net profit of $11.9 million and adjusted EBITDA of $21.9 million.

This quarter isn't just another milestone for Microvast, it's a testament for both long-term commitment required in this industry and the strength of our business model. This strength is not a onetime event, it's now a trend. Our consecutive revenue growth over the last several years indicates increasing market demand for our high-performance products. This growth, along with improvement in our gross profit, validates our ability to successfully commercialize our advanced technology and operate efficiently at scale. The rapid growth has given us invaluable experience, enabling us to successfully deploy commercialized products across our portfolio and to refine our manufacturing processes.

Moving forward, we intend to maintain our strategy by focusing on 3 core pillars: innovation, disciplined execution of our strategic growth objectives and expanding our production capacity to meet growing customer demand. We believe that we are well positioned for the future.

Let's move to Slide 5, which illustrates the core of our business and strategy. At its core, Microvast is a vertically integrated battery technology powerhouse. Our growth isn't accidental, it's driven by relentless commitment to innovation and is our primary engine for expansion. We are actively diversifying our revenue streams with a broader portfolio of products and services, all purpose-built to accelerate electrification. A cornerstone of our strategy is determined push to capture greater market share. We are making focused investments to [ rapid ] commercialize both our advanced products available today and our highly anticipated technologies of the future. We are staying disciplined by maintaining product innovation and strategically expanding our global market presence. This clear path is how we intend to grow, optimize our operations and ultimately achieve our goal of sustained profitability.

Let's turn to Slide 6 for an operational update on our Huzhou Phase 3.2 line expansion. I'm pleased to report that we are in the final stages of installing and commissioning the production equipment with completion targeted for year-end, this expansion is critically important as Phase 3.2 is anticipated to add up to 2 Gigawatt hour of annual production capacity. The strategic timing of this expansion is intended to directly address existing market demand and position us to capture upcoming opportunities. We anticipate this new line initial production to begin in Q1 2026. This expansion is a major step forward, securing our foundation for continued growth in 2026 and beyond.

Moving to Slide 7. Let's look at the progress in our all-solid-state battery development. Building directly on our Q2 update, our proprietary 5-layer cell continues to demonstrate exceptional stability to date. It has now successfully completed over 404 charge/discharge cycles at 1C, maintaining high coulombic efficiency and steady capacity retention throughout the cycling window as illustrated in Figure 1 on the left.

Our high-volume 12-layer prototype also continued its cycle testing. The voltage capacity profile is seen in figure 2 on the right and validates its current testing performance. Prototypes indicate that our approach delivers high structure integrity with minimal losses during charge transfer, a crucial factor for both battery longevity and peak performance.

As detailed on Slide 8, we are integrating our proprietary separator technology into our all-solid-state battery. This has multiple benefits such as improved electrode interfacial contact and improved flexibility, which allows to -- for more consistent manufacturing in comparison to more fragile ceramic separators.

This technology builds on the polyarramid backbone that maintains structural integrity even under elevated temperatures. The membrane robust yet flexible architecture enables high-pressure stacking during assembly, improving both mechanical resilience and the resistance to lithium dendrite penetration. Equally important are its engineered ionic pathways, which create efficient and continuous channels for lithium-ion transport. In short, this breakthrough material integrates safety, mechanical strength and ionic efficiency into a single scalable platform, positioning Microvast as a leader in next-generation all-solid-state battery innovation. This is an example of Microvast's advantage.

Now if you will join me on Slide 9, I'd like to give an exciting new business development update. We have established a partnership with SKODA Group, a leading European rail and public transport manufacturer. The partnership validates Microvast's technology for extreme-duty use cases and high-safety rail applications. We anticipate the first prototype by the end of 2026.

Now I will hand the call over to Rodney to discuss our financials for the third quarter.

Thank you, Mr. Wu. Please join me on Slide 11. We're happy to report a record-breaking third quarter with revenue growing at 21.6% year-over-year to $123.3 million, up from $101.4 million last year. Our year-to-date revenue had a top line growth of 24.3%, reaching $331 million compared to $266 million in the prior year period. This growth was driven primarily by an increase of approximately 360 megawatt hours in sales volume year-to-date. Crucially, this growth was at a gross profit for the third quarter of $46.4 million, an impressive 38% improvement over the prior year period. This was achieved through operational execution, higher margin end markets, increased utilization and cost controls. As a result, our gross profit margin improved by 4.4 percentage points to 37.6%, up from 33.2% in Q3 2024. Our year-to-date gross profit was $121.2 million, which is a 55% increase compared to the prior year period, and gross margin was 36.6%, a 7.3 percentage point improvement year-over-year.

Operating expenses increased to $33.5 million for the quarter compared to $27.5 million in Q3 2024, a 22% increase year-over-year. The G&A increase was primarily due to $3.7 million of exchange loss attributed to the unfavorable euro RMB rate and $5.6 million in litigation expense, partially offset by $2.9 million of decreased noncash share-based compensation expenses or SBC. The decrease in R&D expenses was primarily due to $1.5 million of decreased SBC expense and $1 million associated with lower employee headcount.

The increase in sales-related expenses for the quarter was primarily due to $1.1 million of service fees from business development efforts, partially offset by $0.5 million decrease in SBC expense. OpEx decreased for the year-to-date period to $75 million, down from $195 million last year. For the 9-month period, the decrease in G&A expenses was primarily due to $17.7 million of decreased SBC expense and $7.7 million of decreased exchange loss from favorable fluctuation in the euro RMB rate.

The decrease in R&D expenses was primarily due to $5.4 million of decreased SBC expense and a $1.9 million reduction associated with a lower employee headcount. Selling and marketing expenses were largely flat for the period. There was also a substantial reduction in impairment loss compared to the prior period, down to $1.4 million from $88 million. We reported a GAAP net loss of $1.5 million in the quarter. After adjusting for noncash expenses such as SBC of $0.7 million and fair value changes to our warrant liability and convertible loan of $12.6 million, we achieved adjusted net profit of $11.9 million.

For the 9-month period, GAAP net loss was $45.8 million compared to a net loss of $113.1 million in the prior year period. Non-GAAP adjusted net profit year-to-date was $47.5 million, a major improvement from an adjusted net loss of $84.1 million last year. We are also displaying improved operational results as we report yet another consecutive quarter of positive adjusted EBITDA, reaching $21.9 million. Year-to-date, our positive adjusted EBITDA reached $76.3 million, a substantial improvement compared to a negative adjusted EBITDA of $53.5 million in the prior year period. The financial reconciliations of these non-GAAP metrics can be found in the tables at the end of our earnings press release and the slide presentation.

On Slide 12, we show the geographic breakdown of our revenue mix compared to the prior year period. Our EMEA business accounted for 64% of quarterly revenue. This is up year-over-year from 59% Revenue growth over the 9-month period saw an improvement of 31%, increasing to $176.8 million in the region. The U.S. revenue share increased from 3% to 5% for the quarter when compared to the prior year period. We continue to focus on making inroads with domestic customers and year-to-date revenue is $17.8 million in the region. Our APAC region also grew year-over-year, up 9% year-to-date to $136.5 million, while we also successfully target higher-margin opportunities.

Please turn to Slide 13, and we will review our cash flow for the year-to-date. We are pleased to have generated positive operating cash flow of $59.5 million for the 9-month period. Net loss was primarily offset by a $17.4 million decrease in inventory and noncash adjustments of $24.7 million in D&A and $91 million from changes in fair value of warrant liability and convertible loan. This was partially decreased by $41.2 million increase in net receivables and a $12.3 million decrease in net liabilities and accrued expenses.

From investing activities, we had a net outflow of $15.5 million, primarily related to CapEx at our Huzhou facility, including our Phase 3.2 production line expansion. Financing cash flow resulted in a net outflow of $9.5 million. Overall, after accounting for a negative foreign exchange adjustment of $1.5 million, we had an increase in cash of $33 million. This resulted in a total cash, cash equivalents and restricted cash of $142.6 million at quarter's end.

Now I will hand it back over to Mr. Wu to go over our outlook for the final quarter of the year and closing remarks.

Thank you, Rodney. Please turn to Slide 15, which provides a summary of our outlook for the rest of the year. We are pleased to affirm our initial annual revenue guidance, which positions our projected revenue in the range of $450 million to $475 million. Due to our focus on stronger performing segments and a successful margin expansion efforts, we are also raising our full year gross margin target from 32% to a new range of 32% to 35%.

For APAC, our focus remains on completion of the Phase 3.2 expansion at our Huzhou facility. We anticipate completing the production line by year-end and beginning initial production operation in Q1 2026. As previously stated, this critical additional of up to gigawatt hour annually is intended to address the robust customer demand for our cutting-edge solutions and position us to capture upcoming opportunities.

We expect a strong sales growth for the year, and our development teams are making significant progress on the next wave of advanced products. Our EMEA business is expected to maintain momentum. We are constantly pursuing new strategic partnerships, such as the SKODA partnership discussed earlier to support both current and upcoming product lines in the region. In Americas, we anticipate further revenue growth year-over-year as we continue to proactively pursue customer acquisitions while simultaneously accessing our financing needs to support additional strategic objectives.

Our [ strategy ] remained on achieving 3 primary financial objectives for the final quarter, securing sustained positive cash flow, maintaining gross margins and expanding our market reach powered by our R&D innovation engine. We remain confident that we can continue to bolster our business by capitalizing on global electrification trends with the ultimate goal to deliver long-term value to our shareholders.

Thank you very much, everyone, for joining us today to review another historical quarter of Microvast. We look forward to updating you again with our full year 2025 results and additional news in the coming months.

This concludes today's conference call. Thank you for participating, and you may now disconnect.