This article first appeared on GuruFocus .
Release Date: August 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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European sales increased 35% in Q2 2026, with the region now accounting for 61% of quarterly revenue, up from 43% in the prior year.
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Gross profit remained positive at $25.8 million with a gross margin of 29.5%, despite headwinds from higher raw material costs and lower utilization.
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The Huzhou Phase 3.2 expansion is on track, with equipment commissioning completed and SOP expected in 2026, adding up to 2 GWh of annual capacity.
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Significant R&D progress in solid-state battery technology, including a 17-layer bipolar cell delivering 72 volts with 88.5% capacity retention after 200 cycles and no safety issues in hotbox tests up to 200C.
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The Clarksville, Tennessee pack line assembly remains on schedule for initial output by year-end, supporting U.S. market expansion.
Negative Points
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Revenue decreased 4.5% year-over-year in Q2 2026, partly due to a $2.7 million tariff refund issued to a customer.
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Gross margin declined to 29.5% from 34.7% in Q2 2025, driven by higher raw material prices and lower production utilization.
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Adjusted net loss was $5.3 million in Q2 2026, compared to an adjusted net profit of $16.3 million in the prior year period.
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APAC sales declined 23% in Q2 and 45% year-to-date, impacted by shifting regulatory dynamics and demand shift to lower-cost products in India.
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Operating cash flow turned negative at -$33.3 million for the first half of 2026, versus +$44.3 million generated in the same period of 2025.
Q & A Highlights
Q: What were the key drivers behind the decline in revenue and gross margin for the second quarter of 2026? A: CFO Rodney Worthen explained that Q2 2026 revenue decreased by $4.1 million, or 4.5%, year-over-year to $87.3 million. This was primarily due to a $2.7 million tariff refund issued to a customer, which was recorded as a revenue reduction. Gross margin fell to 29.5% from 34.7% in Q2 2025, driven by higher raw material prices and lower production utilization, which reduced fixed cost absorption.
Q: Can you provide more details on the regional sales performance, particularly in the U.S., Europe, and APAC? A: CFO Rodney Worthen noted that U.S. sales decreased year-over-year due to the tariff refund and a major customer pulling orders forward into 2025 ahead of tariff uncertainty. European sales increased 35% in the quarter, accounting for 61% of quarterly revenue, up from 43% last year. APAC sales declined 23% in the quarter and 45% year-to-date, impacted by shifting regulatory and geopolitical dynamics and a demand shift toward lower-cost products in India.
Q: What is the status of the Huzhou Phase 3.2 expansion and its expected impact? A: CEO Yang Wu stated that installation and commissioning of production equipment for the Huzhou Phase 3.2 expansion is complete, with production capacity ramping up. The company expects SOP (Start of Production) in 2026, and the phase is expected to add up to 2 gigawatt-hours of annual production capacity, designed to be modular across their large battery cell platform.
Q: What are the latest developments in the solid-state battery program? A: CEO Yang Wu highlighted a major milestone: the successful scaling of their series-connected bipolar cell architecture to a 17-layer monolithic stack delivering approximately 72 volts with zero liquid electrolyte. The prototype retained 88.5% of its capacity after 200 cycles. This architecture is primarily focused on robotics, aiming to eliminate heavy interconnects and electronics and improve safety for human-robot environments.
Q: How did the company's cash flow and balance sheet perform in the first half of 2026? A: CFO Rodney Worthen reported that net cash used in operating activities was $33.3 million for the six months, a decrease of $77.6 million compared to the $44.3 million generated in the same period of 2025. This was primarily due to a $60.6 million reduction in net income and a $17 million net change in operating assets and liabilities. The company ended the quarter with $143.1 million in cash, cash equivalents, and restricted cash.
Q: What is the company's strategic focus for the second half of 2026? A: CEO Yang Wu outlined strategic priorities including accelerating the path to profitability, scaling with margin discipline, and expanding in high-barrier heavy industry and transit markets. Operationally, the Huzhou Phase 3.2 remains the central catalyst, with the Clarksville, Tennessee pack line assembly on schedule for initial output by year-end. The build-out of the U.S. battery plant remains contingent on securing additional financing or strategic partnerships.
Q: Can you elaborate on the safety testing results for the solid-state prototype? A: CEO Yang Wu detailed that in controlled hotbox testing up to 200 degrees Celsius, the prototype cell exhibited exceptional stability with no ignition or smoke observed. Even after a high-temperature internal short event, post-test disassembly showed the internal electrode structure remained largely intact, demonstrating the significant safety potential of eliminating liquid electrolyte.
Q: What is the progress on the ultra-high-capacity silicon-sulfur cell technology? A: CEO Yang Wu mentioned that early laboratory prototypes of an all-solid-state silicon-sulfur cell achieved an initial specific capacity of over 1,000 milliampere-hours per gram, retaining over 90% capacity after 15 cycles. The design uses a five-layer bipolar architecture with simultaneous cathode expansion and anode contraction to self-compensate for volume changes, targeting applications like commercial and defense drones.
Q: What were the main drivers of the increase in operating expenses for the quarter? A: CFO Rodney Worthen noted that operating expenses increased to $27.5 million, up 16.1% year-over-year. General and administrative expenses rose by $2.7 million due to a $2.6 million increase in legal and other professional service fees. R&D expenses increased by $1.1 million due to higher labor costs from expanded investment in new product development, and selling and marketing expenses rose by $1.3 million due to service fees for customer retention initiatives.
Q: How did the adjusted EBITDA and net loss compare to the prior year? A: CFO Rodney Worthen reported a GAAP net loss of $12 million for Q2 2026. After adjusting for noncash expenses like stock-based compensation and fair value changes, the adjusted net loss was $5.3 million, compared to an adjusted net profit of $16.3 million in Q2 2025. Non-GAAP adjusted EBITDA was $3.6 million in Q2 2026, down significantly from $25.9 million in the same period last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
