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Movella Reports First Quarter 2023 Financial Results

  • Q1 revenue totaled $9.2 million, Q1 GAAP gross margin was a record 61%, an improvement of approximately 1000 basis points year-over-year
  • Introduced MTi-320 high-performance Active Heading Tracker (AHT) for robotics and autonomous vehicle applications
  • Strong response to the new OBSKURTM platform resulting in over-subscription to early access stage prior to launch this summer

HENDERSON, Nev., May 10, 2023 (GLOBE NEWSWIRE) — Movella Holdings Inc. (NASDAQ: MVLA) (“Movella”), a leading full-stack provider of sensors, software, and analytics that enable the digitization of movement, today reported its results for the first quarter ended March 31, 2023.

“We believe our strong cash position resulting from our Nasdaq listing will allow us to continue our focus on execution and on bringing new, innovative products to the market,” said Movella CEO Ben Lee. “The impressive early access response to OBSKUR, Movella’s new all-in-one platform that provides live-streaming influencers with tools and assets for delivering immersive interactive experiences, is an example of our strong execution.”

First Quarter 2023 Financial Highlights

  • Revenue. Net revenue in Q1 totaled $9.2 million, a decrease of 4% year-over-year.  
  • Gross Profit. GAAP gross profit rose to $5.6 million as compared to $4.8 million last year. GAAP gross margin reached a record 61%, an improvement of approximately 1000 basis points year-over-year. Non-GAAP gross profit totaled $5.9 million versus $6.0 million for the comparable quarter in the previous year. Non-GAAP Q1 gross margin was 64%.
  • Loss from Operations. GAAP loss from operations in Q1 was $9.4 million, inclusive of a $4.7 million non-cash intangibles impairment charge, versus $5.5 million in the same period last year. Non-GAAP loss from operations was $3.6 million, a decrease of $0.1 million year-over-year.
  • GAAP Net Income. GAAP net income attributable to common stockholders totaled $15.5 million versus a net loss of $6.3 million in the comparable quarter in the previous year.
  • Adjusted EBITDA. Adjusted EBITDA in Q1 totaled negative $3.0 million, an improvement of $0.1 million year-over-year.
  • Cash and cash equivalents. Cash and cash equivalents at quarter end were $62.1 million, compared to $14.3 million as of December 31, 2022.

“While the challenging macro environment and typical seasonality weighed on our first quarter top line performance, we expect to achieve near-term adjusted EBITDA breakeven and subsequent profitability, driven by continued gross margin expansion and prudent expense management,” said Movella CFO Steve Smith. “We believe our results combined with our expectations reflect the strength of our business and our ability to execute on our strategy to deliver value for our shareholders.”

First Quarter 2023 Business Highlights

  • Received strong response to the new OBSKUR platform, resulting in over-subscription to early access stage prior to production launch this summer
  • Improved time-to-market and reduced cost of production for leading-game developer Ubisoft by leveraging Movella’s Xsens motion capture suits for real-time prototyping and pre-visualization of character movement
  • Introduced MTi-320 high performance Active Heading Tracker (AHT) for robotics and autonomous vehicle applications
  • Announced the appointment of Dale Pistilli as Vice President of Marketing to drive brand strategy and the overall marketing efforts of the company

“To accelerate the OBSKUR momentum, enhance the Movella brand, and grow as a public company, we are excited to announce the appointment of Dale Pistilli as our new VP of Marketing,” continued Movella CEO Ben Lee. “Dale’s deep knowledge of influencer and creator marketing complements the strengths of the executive team we’ve built over the past two years, including CFO Steve Smith’s strong public company background, and CTO Vijay Nadkarni’s AI expertise and leadership from his previous companies.”

Conference Call and Webcast Information

The company will hold a conference call at 2:00 p.m. PT / 5:00 p.m. ET on Wednesday, May 10, 2023 to discuss Movella’s financial results and outlook. The call will be hosted by Ben Lee, CEO and Steve Smith, CFO. Q&A with management will follow immediately after prepared remarks.

A live webcast of the call will be accessible on the investor relations section of the Movella website at https://investors.movella.com/. To access the call by phone, please register at https://register.vevent.com/register/BIbe1840b8f26a44b1b4035c6653c3ee93. Upon registration, telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the webcast will also be available for a limited time at https://investors.movella.com/.

About Movella Holdings Inc.

Movella is a leading full-stack provider of sensors, software, and analytics that enable the digitization of movement. Movella serves the entertainment, health & sports, and automation & mobility markets. Our innovations enable customers to capitalize on the value of movement by transforming data into meaningful and actionable insights. Partnering with leading global brands such as Electronic Arts, EPIC Games, 20th Century Studios, Netflix, Toyota, Siemens, and over 500 sports organizations, Movella is creating extraordinary outcomes that move humanity forward. To learn more, please visit www.movella.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of federal securities laws. The words “accelerate,” “anticipate,” “believe,” “continue,” “could,” “enable,” “estimate,” “expect,” “extend,” “fuel,” “future,” “growth,” “intend,” “may,” “might,” “opportunity,” “outlook,” “plan,” “position,” “possible,” “potential,” “predict,” “progress,” “project,” “realize,” “see,” “seem,” “should,” “will,” “would,” and similar expressions, or the negative of such expressions, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the following: our belief that our strong cash position will allow us to continue our focus on execution and on bringing new, innovative products to the market; that we expect to achieve near-term adjusted EBITDA breakeven and subsequent profitability; our ability to execute on our strategy to deliver value to shareholders, macro-environment challenges; the anticipated or potential features, benefits, and applications for Movella’s products and technology and timing thereof; the anticipated benefits and limitations of non-GAAP financial measures; the market opportunity for Movella’s products and technology; or other characterizations of future events or circumstances, including any underlying assumptions. These statements are based on the current expectations of Movella’s management and are not predictions of actual performance. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Movella’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: (i) failure to realize the anticipated benefits of the business combination; (ii) general economic and macro-economic conditions and Movella’s financial performance and factors affecting the same; (iii) changes adversely affecting the businesses and target markets in which Movella is engaged; (iv) Movella’s ability to execute on its business strategy and plans and to manage growth; and (v) risks related to regulatory matters, as well as the factors described under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and under similar headings in the final prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(3) by Pathfinder on January 17, 2023, the Company’s annual report on Form 10-K for the year ended December 31, 2022 and current reports on Form 8-K filed on February 13, 2023 and March 31, 2023, and in Movella’s future filings with the SEC. If any of these risks materialize or the underlying assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Movella presently knows or currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect expectations, plans or forecasts of future events and views as of the date of this press release. Movella anticipates that subsequent events and developments will cause its assessments to change. However, Movella specifically disclaims any obligation to update any forward-looking statements, except to the extent required by applicable law. These forward-looking statements should not be relied upon as representing Movella’s assessments as of any date subsequent to the date of this press release and are not intended to serve as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Non-GAAP Financial Measures

Movella Holdings has provided financial information in this news release that has not been prepared in accordance with GAAP. Adjusted EBITDA, non-GAAP gross profit, and non-GAAP operating loss exclude net loss attributable to non-controlling interests, preferred stock dividends, share-based compensation expense, loss on debt extinguishments related to the consummation of the business combination agreement, debt issuance costs, change in fair value of warrant liabilities fair value adjustments on debt instruments for which we elected the fair value option under ASC 825, and impairment of acquired intangible assets. Adjusted EBITDA also excludes interest expense and income, taxes, depreciation and amortization, other income (expense), and certain non-recurring transaction expenses related to the business combination agreement.

Adjusted EBITDA, non-GAAP gross profit, non-GAAP gross margin, and non-GAAP operating loss are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. These non-GAAP financial measures have limitations as an analytical tool and are not intended to be used in isolation or as a substitute for net loss, gross profit, operating loss or any other performance measure determined in accordance with GAAP. We present these non-GAAP financial measures because we consider each to be an important supplemental measure of our performance.

We use these non-GAAP financial measures to make operational decisions, evaluate our performance, prepare forecasts and determine compensation. Further, we believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. Share-based compensation expenses are expected to vary depending on the number of new incentive award grants issued to both current and new employees, the number of such grants forfeited by former employees, and changes in our stock price, stock market volatility, expected option term and risk-free interest rates, all of which are difficult to estimate. In calculating non-GAAP financial measures, we exclude certain non-cash and one-time items in order to facilitate comparability of our operating performance on a period-to-period basis because such expenses are not, in our view, related to our ongoing operating performance. We use this view of our operating performance for purposes of comparison with its business plan and individual operating budgets and in the allocation of resources.

We further believe that these non-GAAP financial measures are useful to investors in providing greater transparency to the information used by management in its operational decision-making. The Company believes that the use of these non-GAAP financial measures also facilitates a comparison of our underlying operating performance with that of other companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results.

Investors and potential investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. The limitations of relying on non-GAAP financial measures include, but are not limited to, the fact that other companies, including other companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting their usefulness as a comparative tool. Investors and potential investors are encouraged to review the reconciliation of our non-GAAP financial measures contained within this news release with our GAAP financial results.

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MOVELLA HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
  Three Months Ended March 31,
    2023       2022  
  (unaudited)
Revenues               
Product $ 7,659     $ 8,100  
Service   1,508       1,408  
Total revenues   9,167       9,508  
Cost of revenues      
Product   2,361       3,589  
Service   1,210       1,113  
Total cost of revenues   3,571       4,702  
Gross profit   5,596       4,806  
Operating expenses      
Research and development   2,904       3,536  
Sales and marketing   3,480       3,440  
General and administrative   3,957       3,337  
Impairment of intangible assets   4,657        
Total operating expenses   14,998       10,313  
Loss from operations   (9,402 )     (5,507 )
Other income (expense)      
Loss on debt extinguishment   (107 )      
Change in fair value of warrant liabilities   1,390        
Debt issuance costs   (7,945 )      
Revaluation of debt   31,868        
Interest expense   (172 )     (400 )
Interest income   256       4  
Other income (expense), net   (115 )     83  
Income (loss) before income taxes   15,773       (5,820 )
Income tax expense   58       15  
Net income (loss)   15,715       (5,835 )
Net loss attributable to non-controlling interests   (121 )     (239 )
Net income (loss) attributable to Movella Holdings Inc.   15,836       (5,596 )
Deemed dividend from accretion of Series D-1 preferred stock   (316 )     (659 )
Net income (loss) attributable to common stockholders $ 15,520     $ (6,255 )
       
Earnings per share attributable to common stockholders      
Basic $ 0.51     $ (1.38 )
Diluted $ 0.36     $ (1.38 )
Weighted average shares used in computing earnings per share attributable to common stockholders      
Basic   30,440,497       4,529,543  
Diluted   44,562,485       4,529,543  
               

MOVELLA HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
  March 31,
2023
  December 31,
2022
ASSETS (unaudited)
Current assets      
Cash and cash equivalents $ 62,096     $ 14,334  
Accounts receivable, net of allowance for credit losses of $440 and $144 at March 31, 2023 and December 31, 2022   4,716       6,690  
Inventories   6,570       5,164  
Prepaid expenses and other current assets   5,657       3,274  
Total current assets   79,039       29,462  
Property and equipment, net   2,362       2,361  
Goodwill   36,666       36,381  
Intangible assets, net   843       5,807  
Non-marketable equity securities   25,285       25,285  
Capitalized equity issuance costs and other assets   1,735       4,265  
Deferred tax assets   86       86  
Right-of-use assets   3,107       3,281  
Total assets $ 149,123     $ 106,928  
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)      
Current liabilities      
Accounts payable $ 3,896     $ 5,967  
Accrued expenses and other current liabilities   7,356       7,944  
Line of credit and current portion of long-term debt   148       148  
Current portion of deferred revenue   3,159       3,334  
Payable to Kinduct sellers – current         4,303  
Total current liabilities   14,559       21,696  
Long-term portion of term debt   43,187       25,649  
Convertible notes, net – related party         6,186  
Warrant liabilities   1,513        
Deferred revenue, net of current portion   1,389       1,344  
Operating lease liabilities and other non-current liabilities   2,982       3,088  
Total liabilities   63,630       57,963  
Commitments and contingencies      
Mezzanine equity      
Redeemable convertible preferred stock, $0.00001 par value. 0 shares authorized, issued, and outstanding at March 31, 2023; 3,207,472 shares authorized, issued and outstanding as of December 31, 2022; liquidation preference of $30,000 as of December 31, 2022         41,991  
Non-redeemable convertible preferred stock, $0.00001 par value. 20,000,000 shares authorized, 0 shares issued, and outstanding at March 31, 2023; 29,524,294 shares authorized and 24,338,566 shares issued and outstanding as of December 31, 2022; liquidation preference of $146,548 as of December 31, 2022         143,192  
Total mezzanine equity         185,183  
Stockholders’ deficit      
Common stock, $0.00001 par value. 900,000,000 shares authorized, 50,693,308 and 6,231,947 shares issued and outstanding at March 31, 2023 and December 31, 2022   1       1  
Additional paid-in capital   206,428       692  
Accumulated other comprehensive loss   (1,386 )     (1,646 )
Accumulated deficit   (126,180 )     (142,016 )
Total Movella stockholders’ equity (deficit)   78,863       (142,969 )
Non-controlling interest in subsidiaries   6,630       6,751  
Total stockholders’ equity (deficit)   85,493       (136,218 )
Total liabilities, mezzanine equity and stockholders’ equity (deficit) $ 149,123     $ 106,928  
               

MOVELLA HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  Three Months Ended March 31,
    2023       2022  
Cash flows from operating activities (unaudited)
Net income (loss) $ 15,715     $ (5,835 )
Adjustments to reconcile net loss to net cash used in operating activities      
Depreciation and amortization   672       1,852  
Stock-based compensation expense   664       313  
Allowance for credit losses   296        
Impairment of intangible assets   4,657        
Unrealized loss (gain) on marketable securities         58  
Accretion of convertible notes, net   61       76  
Accretion of Kinduct deferred payout   57        
Amortization of debt discount and debt issuance costs   52       69  
Gain on change in fair value of warrant liabilities   (1,390 )      
Gain on revaluation of debt   (31,868 )      
Loss on debt extinguishment   107        
Debt issuance costs   7,945        
Right-of-use assets   174        
Changes in operating assets and liabilities, net of acquisition      
Accounts receivable   1,788       728  
Inventories   (1,229 )     (1,063 )
Prepaid expenses and other assets   (1,408 )     (50 )
Other assets   (1,594 )     10  
Accounts payable   629       (1,046 )
Accrued expenses and other liabilities   (397 )     (297 )
Deferred revenue   (235 )     514  
Other liabilities   (136 )     (74 )
Net cash used in operating activities   (5,440 )     (4,745 )
Cash flows from investing activities      
Purchase of intangibles   (15 )     (153 )
Purchases of property and equipment   (191 )     (215 )
Net cash used in investing activities   (206 )     (368 )
Cash flows from financing activities      
Proceeds from Venture Linked Notes   75,000        
Payment of debt issuance costs   (8,791 )      
Proceeds from Business Combination   36,048        
Payment of equity issuance costs   (18,682 )      
Repayment of loans using proceeds from Venture Linked Notes   (25,557 )      
Proceeds from term loans and revolving line of credit, net         943  
Proceeds from issuance of convertible notes         4,873  
Principal payments of loans         (280 )
Proceeds from the exercise of stock options   10       87  
Payment of deferred payout to Kinduct sellers   (4,360 )      
Net cash provided by financing activities   53,668       5,623  
Effect of foreign exchange rate changes on cash and equivalents   (260 )     (219 )
Net increase in cash and cash equivalents   47,762       291  
Cash and cash equivalents      
Beginning of period   14,334       11,166  
End of period $ 62,096     $ 11,457  
       
Supplemental disclosures of cash flow information      
Cash paid for interest $ 557     $ 207  
Cash paid for taxes, net of refunds   59       47  
Supplemental disclosure of non-cash financing activity      
Accretion of Series D-1 convertible preferred Stock $ 316     $ 659  
Issuance of convertible notes in exchange for Kinduct deferred payout         1,148  
Issuance of warrants to lender         18  
Right-of-use assets obtained in exchange for operating lease liabilities         4,280  
Issuance of common stock upon conversion of Convertible notes   6,520        
Issuance of common stock upon conversion of preferred stock   185,499        
Acquisition of warrant liabilities   2,903        
Capitalized equity issuance costs applied to proceeds   4,248        
               

MOVELLA HOLDINGS INC.
Reconciliation of GAAP Net Income Attributable to Common Stockholders to Non-GAAP Net Loss
(In thousands)
(Unaudited)
  Three Months Ended
March 31, 2023
  Net Loss   Net Income (Loss) Per Share
GAAP net income attributable to common shareholders $ 15,520     $ 0.51  
Deemed dividends from accretion of Series D-1 Preferred Stock   316       0.01  
Stock-based compensation   664       0.02  
Intangibles amortization   457       0.02  
Loss on debt extinguishment   107        
Debt issuance costs   7,945       0.26  
Revaluation of debt   (31,868 )     (1.04 )
Change in fair value of warrant liabilities   (1,390 )     (0.05 )
Impairment of intangible assets   4,657       0.15  
Non-GAAP net loss $ (3,592 )   $ (0.12 )
               

MOVELLA HOLDINGS INC.
Reconciliation of GAAP Cost of Revenues and Operating Costs and Expenses to Non-GAAP Cost of Revenues and Operating Costs and Expenses
Three Months Ended March 31, 2023
(In thousands)
(Unaudited)
      Adjustments    
  GAAP
Financials
  Stock-Based
Compensation
  Amortization
of Intangibles
  Impairment of
Intangibles
  Non-
GAAP
Financials
Revenues                  
Product $ 7,659                 $ 7,659  
Service   1,508                   1,508  
Total revenues   9,167                   9,167  
Cost of revenues                  
Product   2,361                   2,361  
Service   1,210           260         950  
Total cost of revenues   3,571           260         3,311  
Gross profit                  
Product   5,298                   5,298  
Service   298                   558  
Total gross profit   5,596                   5,856  
Gross margin                  
Product   69.2 %                 69.2 %
Service   19.8 %                 37.0 %
Total gross margin   61.0 %                 63.9 %
Operating expenses                  
Research and development   2,904       219             2,685  
Sales and marketing   3,480       140     139         3,201  
General and administrative   3,957       305     58         3,594  
Impairment of intangible assets   4,657               4,657      
Total operating expenses $ 14,998     $ 664   $ 197   $ 4,657   $ 9,480  
Total     $ 664   $ 457   $ 4,657    
Loss from operations $ (9,402 )               $ (3,624 )
                           

MOVELLA HOLDINGS INC.
Reconciliation of GAAP Net Income Attributable to Common Stockholders to Non-GAAP Net Loss and Adjusted EBITDA
(In thousands)
(Unaudited)
  Three Months Ended
March 31, 2023
Net income attributable to common stockholders $ 15,520  
Deemed dividend from accretion of Series D-1 preferred stock   316  
Stock-based compensation   664  
Amortization of acquired intangibles   457  
Loss on debt extinguishment   107  
Change in fair value of warrant liabilities   (1,390 )
Debt issuance costs   7,945  
Revaluation of debt   (31,868 )
Impairment of intangible assets   4,657  
Non-GAAP net loss $ (3,592 )
Interest expense   172  
Interest income   (256 )
Income tax expense   58  
Depreciation and amortization, excluding acquired intangibles   215  
Other expenses, net   115  
Non-recurring transaction expenses   316  
Adjusted EBITDA $ (2,972 )
       

MOVELLA HOLDINGS INC.
Quarterly Net Revenues by Product Grouping
(In thousands)
(Unaudited)
  Three Months Ended
  March 31,
2023
  December 31,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
Product $ 7,659   $ 10,068   $ 9,051   $ 7,064   $ 8,100
Service   1,508     2,049     1,213     1,513     1,408
Total revenues $ 9,167   $ 12,117   $ 10,264   $ 8,577   $ 9,508

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