Electrovaya Q1 2025 Earnings Call Transcript

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February 13, 2025

There are 9 speakers on the call.

Operator

Please note this conference is being recorded.

Operator

I will now turn the conference over to your host, John Gibson, CFO. You may begin.

Speaker 1

Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q1 twenty twenty five Financial Results. Today's call is being hosted by Doctor. Raj Dasgupta, CEO of Electrovaya and myself, John Gibson, CFO. Today, Electrovaya issued a press release concerning its business highlights and financial results for the three month period ending 12/31/2024.

Speaker 1

If you would like a copy of the release, you can access that on our website. If you'd like to view our financial statements and management discussion and analysis, you can access those documents on the SEDAR Plus website at www.cedarplus.sedarplus.ca or on the SEC's EDGAR website at sec.gov/edgar. As with previous calls, our comments today are subject to the normal provisions relating to forward looking information. We will provide information relating to our current views regarding market trends, including their size and potential for growth and our competitive position within our target markets. Although we believe that the expectations reflected in such forward looking statements are reasonable, they do obviously involve risks and uncertainties, and actual results may differ materially from those expressed or implied in such statements.

Speaker 1

Additional information about factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward looking statements may be found in the company's press release announcing the Q1 fiscal twenty twenty five results and the most recent annual information form and management discussion analysis under risks and uncertainties, as well as in other public disclosure documents filed with Canadian security regulatory authorities and are equivalent in The U. S. Also, please note that all the numbers discussed on the call are in U. S. Dollars unless otherwise noted.

Speaker 1

And now, I'd like to turn the call over to Raj.

Speaker 2

Thank you, John, and good evening, everyone. It is a pleasure to address you today as we discuss our Q1 fiscal year twenty twenty five quarter. This quarter was marked by several groundbreaking milestones that underlined the strength of our business and our trajectory for growth. I'll highlight a few of the key ones here. Despite the typical weaker seasonality of Q1, we delivered a strong financial performance with $11,200,000 in revenue, achieving over 30% margins and our seventh consecutive quarter of positive adjusted EBITDA.

Speaker 2

During the quarter, we secured a $51,000,000 direct loan approval from the Export Import Bank of the United States under the bank's Make More in America initiative, a pivotal step towards expanding our lithium ion cell manufacturing in Jamestown, New York. This move will not only increase capacity, but also improve margins and enable larger scale projects. In order to support closing conditions and support bank refinancing activities, we embarked on a successful equity raise with gross proceeds of about $12,800,000 which was led by excellent institutions with a long term mindset. It is great to see that support, especially as it has been a difficult market for clean technology in general. Now, this equity round was sufficient to meet the requirements of Exim and the North American banking partner we are working with, which was a key condition for both parties.

Speaker 2

Furthermore, it has led to significant strengthening of our balance sheet and financial position, which has allowed us to accelerate our Jamestown battery system assembly plans. Further on that point, we decided to accelerate our plans for battery system assembly operations at the Jamestown facility. Similar assembly equipment that is currently used at our existing Ontario facility has been procured, some of which is already installed and hiring key personnel is well underway. I anticipate being able to commence commercial operations by in April 2025. However, we have the capability to further accelerate this if necessary.

Speaker 2

The start of assembly in Jamestown will help support ramp up in overall production, while also supporting the company's mitigation strategy with respect to potential trade barriers. Overall, I believe Electrovaya has a robust tariff mitigation strategy, portions of which are already being implemented. With regards to sales, Electrovaya continues to see good momentum from its two material handling OEM partners and end customers of its material handling products. As some of you may have noticed, Toyota Material Handling and Raymond Corporation are merging under Toyota Material Handling North America. I believe this will ultimately be beneficial to Electrovaya as it will streamline some of our activities.

Speaker 2

A recently introduced leasing program with one of the ROAM partners has demonstrated high sales interest and has already led to encouraging traction. Furthermore, the company has seen momentum growing from one of its key end customers for repowering existing warehouse infrastructure with Electrovaya batteries. Also a positive sign is our current largest operator of battery equipment, a Fortune 100 retailer, who has indicated renewed demand for Electrovibe products. We are seeing increasing activity in other sectors and are on track to ship our first modules to a global construction OEM in Japan later this quarter. In Japan, we've had a flurry of interest through our partnership with Sumitomo Corporation with other prospective OEMs, which I believe some of which will turn into material contracts.

Speaker 2

There are also a number of projects in development for autonomous vehicle applications, which includes everything from warehousing products to defense vehicles. Our high voltage battery products continue to be seeded in a wide variety of potential applications. Our solid state developments continue to make progress. Today, we have pouch cells cycling consistently to over 200 cycles. We have achieved a proof of concept for scalable manufacturing of solid state separators.

Speaker 2

And our current focus is on increasing the scale of manufacturing processes and optimizing the cell chemistry. By far, our highest near term priority remains ensuring that the Jamestown facility is financed to produce our world beating lithium ion battery products. We are currently in the process of finalizing loan documentation with both EXIM and a leading North American bank for their respective financing packages to support both the Jamestown expansion as well as improve the company's overall working capital position. There has been substantial progress and I would say most of the documentation is substantially advanced. We continue to anticipate closing these facilities almost simultaneously and during the current quarter.

Speaker 2

With that, I'd like to pass the call back to John Gibson, who will go into the financial results in more detail.

Speaker 1

Thanks, Raj. Revenue for Q1 twenty twenty five was $11,200,000 compared to $12,100,000 in Q1 twenty twenty four, with the decrease being due to delivery timing rather than production or order volume. Q1 is, as in the past, affected by seasonal shutdowns from our customers with little to no deliveries made in the last two weeks of the quarter. The company also had approximately $1,000,000 of finished goods awaiting shipment at the end of the quarter. As we previously stated, we had $20,000,000 of orders pushed out of the 2024 fiscal year as a result of customer delays.

Speaker 1

However, I'm happy to say that we have started to ship those orders during this quarter and will continue throughout Q2 and Q3. We also continue to move closer to our breakeven point of $50,000,000 and maintain our 2025 revenue guidance with a ramp up beginning in Q2 twenty twenty five. Gross margin for the quarter was 30.5%, an increase on the prior quarter figure of 29.2%. Battery system margin was slightly higher at 30.8% for the year. Gross margins will vary based on product mix and timing, and management is focused on maintaining strong margins throughout 2025 and beyond.

Speaker 1

Although our operating loss slightly increased year over year, it is important to note that the company had approximately $340,000 of non recurring operating expenses in the quarter with no corresponding expenses in the prior year. This obviously has a material impact on our operating product. Our adjusted EBITDA was $500,000 which is flat to the prior year. We have now recorded seven consecutive quarters of positive adjusted EBITDA. This gives us a strong capability to continue our growth plans and support operations going forward.

Speaker 1

Overall, net loss for the quarter was $400,000 compared to $200,000 in the prior year. Were Were it not for the one off costs mentioned, then we would have been close to breakeven for this quarter. The company generated positive cash flow provided by operation activities of $1,000,000 and negative net changes in working capital of $1,200,000 compared to overall positive cash flow from operations of $500,000 in the prior year. The company ended Q1 twenty twenty five with positive net working capital of $12,600,000 compared to negative net working capital of $400,000 in the prior year. This demonstrates the continued improved financial and operational performance of the company, and management is committed to continuing this positive trend.

Speaker 1

At 12/31/2024, total debt was $15,300,000 compared to $18,400,000 in the prior year. Management continues to manage cash conservatively. And as Raj mentioned, we are close to refinancing our working capital facility, which will reduce our overall financing costs and provide us with additional working capital headroom as we increase production in 2025. We believe we have adequate liquidity to support our anticipated growth for the fiscal year. That concludes the financial overview.

Speaker 1

I'll turn the call over to Raj for concluding remarks.

Speaker 2

Thank you, John. In closing, Electrovaya started fiscal year twenty twenty five on the right note. Our technology is industry leading and the general focus globally and especially in The United States on domestic manufacturing works to our favor. Electrovaya, in my opinion, has never been in a better position for success. That concludes our remarks this evening.

Speaker 2

John and I would now be pleased to hold a question and answer session.

Operator

Thank you. At this time, we will be conducting a question and answer session. Our first question comes from Daniel Magner with Raymond James. Please proceed.

Speaker 3

Just a few questions from my end. It sounds like existing facilities rather than new builds are becoming more of an opportunity for at least one customer. Do you expect other customers to follow-up soon?

Speaker 2

Yes. Existing facilities represents a larger opportunity size. This particular customer started out using our technology in new facilities. They saw the benefits in those facilities and made a strategic decision to start implementing our technology across their existing infrastructure. So that was a great thing to see.

Speaker 2

We expect to see some more of that with other major end customers and that's really our strategy. They get to see the product sometimes when they're making new investments and they see those benefits and then they expand that to existing infrastructure. So definitely a good sign, something we'd like to see more of and that's something I would expect to see more of in the coming years.

Speaker 3

Got it. And I guess in discussions with customers, any indication that the current U. S. Administration's policies will potentially lead to delays in orders?

Speaker 2

We haven't seen that at all thus far. I think the policies have provided some anxiety with respect to potential price increases. But beyond that, no. In fact, I'd say that some customers are trying to get their orders in sooner in fear that prices might go up.

Operator

The next question comes from Eric Stine with Craig Hallum. Please proceed.

Speaker 4

So just on the Exim bank loan, can you talk about steps left to finalize it and maybe it's simply you're almost there and you've just got the last few things to tie up. So that would be first. And then just curious, there's obviously a lot of noise around the new administration and funding and I know that's primarily the infrastructure bill and the IRA, but just wondering level of confidence in closing this loan against the current political backdrop?

Speaker 2

Yes. On your first question, I'd say it's in terms of condition, precedence and things like that, we've already met those. We're at the point where it's essentially working out the loan documents. Now there are two banks involved, there's Exim and there's a large North American bank who handles the working capital side of things. So the two banks have to work together.

Speaker 2

There's an inter creditor. All those documents are lengthy and need a lot of lawyers to get through. But we're well underway on that process. And like I said in the call, we expect that to be fully closed this quarter. So making very good progress there.

Speaker 2

On your second question, both John and I were in Washington fairly recently. Exim is in good is, I would say, not affected by some of those changes you mentioned, and we see no reason to be worried about closing this. Overall, this project of ours fits perfectly with the new administration's goals, right? It's manufacturing in The United States, bringing that manufacturing back from overseas. It's a strategic product.

Speaker 2

So, and the EXIM portion that we're in is called Make More in America, which is something I think the new administration would have named themselves. So I think we're in a good position.

Speaker 4

Okay. It's good color. And maybe just turning to Sumitomo, you mentioned, I think your quote, a flurry of interest in

Speaker 3

that.

Speaker 4

I mean, I'm just curious, is that interest in a like product, so in construction equipment or is that for other applications? And if so, what are those applications?

Speaker 2

Most of the interest is coming from the construction space. So while we had already signed up last year with this global construction OEM in Japan and that was through Sumitomo. There's a second one we're very close to closing and there's a few others actually we're in discussions with. In Japan, as you may know, there are quite a few large OEMs in the construction space that are based there. So great progress overall.

Speaker 2

And we're shipping our first modules to Japan this quarter.

Speaker 4

Got it. That's right. Okay. Perfect. And then last one for me.

Speaker 4

I know you reiterated the guide in Q1 that was I think pretty aligned with what your expectation was. Can you just remind us of kind of linearity of revenues or expectations throughout the remainder of fiscal 'twenty five?

Speaker 2

Yes. It should be onwards and upwards. So this current quarter, we've ramped up assembly. We're also getting ready to put that into Jamestown. So I would say it's every quarter should be you should see some we're expecting to see growth quarter to quarter.

Speaker 4

Okay. Pretty gradual, I mean, kind of spread nicely or is there a quarter where you based on where backlog is today, you think there could be a step up?

Speaker 1

I think each quarter is probably going to be a step up from the previous one.

Operator

The next question comes from Craig Irwin with Ross Capital. Please proceed.

Speaker 5

Good evening. Thanks for taking my questions. Raj, can you maybe give us an update on the new markets where you're going to see important deliveries this year that kind of lay the foundation for growth over the next couple of years? I mean, you've talked about mining, robotics, rail, military and other opportunities. What's changed or maybe what's the update that you can share with us at this point?

Speaker 2

Yes. So Craig, great question. So it is a smorgasbord of opportunities. These are what I would call seeding opportunities, which go into it takes time for new products to go into scale. An OEM customer will take roughly two years to scale something up.

Speaker 2

But we're in a lot of places as you mentioned, robotics, where we're building modules and packs specifically for various partners. We've seen repeat orders recently from AGV OEM that we hadn't seen orders from for quite a long time. So that's positive. And then like you said, mining, construction, electric trucks are a topic that's come up again and defense. What we're seeing is, I would say, these opportunities are heating up, partly because we added some staff in The U.

Speaker 2

S. On the sales front. But I would say partly potentially because our competition is not doing too well. And so we're seeing some opportunities coming up from probably OEM customers who are looking to switch suppliers.

Speaker 5

So then you've had some new products that you've been talking about for a while and I know you've been testing those with different customers and they're sort of at the early stages of rollout. Can you maybe talk about how these high power products are expanding your opportunity for this year? Do you expect them to make a material contribution to mix? And are they important for serving these customers that historically used another supplier?

Speaker 2

Yes, I'd say the primary goal with these opportunities is to ramp up our demand really twenty twenty six onwards. In fiscal twenty twenty five, they are going to we are seeing revenue generated from some of these opportunities, but still pales in comparison to the material handling revenue. But what we'd like to see is by 2026, '20 '20 '7, it really becomes a very diverse pool of applications we're in. And we're very confident we're going to see that based on the progress we've seen in some of these opportunities, which are still too early really to delve into in much detail. But like I said, they span everything from defense, from trucks,

Speaker 6

from

Speaker 2

AGVs, etcetera. So it's a great long list of applications.

Speaker 5

Great. And then last question, if I may. Can you maybe describe for us the process you went through with ExSim to bring the supply chain to North America? Can you maybe talk about your selection of anode and cathode suppliers, other materials used in the battery manufacturing, other equipment used in the battery manufacturing? And how sort of North American centric this is?

Speaker 5

And then has the financing for Jamestown from ExSim and the improved visibility on that facility, has that changed customer conversations in North America and maybe led to a different character or volume of discussions with these important U. S. And Canadian customers?

Speaker 2

Yes. So our objective, main objective with the with Exim and Jamestown in particular is to make a domestic domestically produced lithium ion cell with Electrovaya technology. And also to diversify our supply chain and get to that fundamentally to have a fully North American base. It's going to go in stages, I think. First, we're going to rely on some supply chains from Korea and Japan.

Speaker 2

And then as time goes on, more and more will be domestic. But from the get go, we will not be reliant on anything from the PRC. And that was one of the goals with EXIM. And that includes the manufacturing equipment as well. So that's what we're heading towards.

Speaker 2

We've qualified those materials over the last almost a year. So we're well on our way on that process. To your second point, most definitely that domestic manufacturing and our exciting technology as well is bringing in interest from parties who are specifically looking for that. So just last week, we got approached by another large defense contractor and that's an opportunity that we were not expecting. So these are the types of things that we could see more of, especially after things start moving more substantially in Jamestown.

Speaker 5

Excellent. Well, congratulations on the progress there. I'll hop back in the queue.

Operator

The next question comes from Jeffrey Campbell with Seaport Research Partners. Please proceed.

Speaker 7

Thank you and congratulations on a good quarter. Raj, you're guiding 2025 revenues to exceed $60,000,000 just high level, what part or parts of the business might put that estimate at risk?

Speaker 2

So I'd say everything could provide upside, especially the material handling space. The $60,000,000 is a conservative figure, where actually if you read our FLI, it's sort of broken down in there, but it could most definitely go up. It's pretty early into the fiscal year still. I would say next quarter will provide some more granularity to that guidance. But at this point, we just want to remain pretty buttoned up and conservative.

Speaker 2

There are lots of opportunities that could move the needle. Okay.

Speaker 7

Well, good. We'll stay tuned to that. The press release noted growing rental traction through an OEM, so two questions there. One, is it reasonable to assume that some of this new traction includes a new customer mix that's more sensitive to upfront capital costs? And the other in contrast, why is one of your largest customers choosing rentals for its existing warehouses instead of just buying new batteries as they would for a greenfield unit?

Speaker 2

It wasn't referring to rentals, it was leasing. So if you think about our two OEM partners, the Raymond and there's Toyota Material Handling, and now they're coming under the same umbrella, well, they already are under the same umbrella, but even more so. What we find is there is a certain segment of customer which prefers to lease equipment and that type of customer typically has not used our products because they're more expensive. With this higher residual value leasing, which is worked out with in partnership with the OEM, taking into account historical performance of the batteries, the cycle life, the reliability, the warranty rates, etcetera. And with all of that came up with a pretty strong financial package to provide potential customers.

Speaker 2

And that's been a very successful program, very new, launched in late October and it's already generated with that particular OEM more business for us than all of last year.

Speaker 7

So, if I understand it, what we might say here is that this particular customer left to their own devices might have just leased equipment from the get go, but they tried your equipment out in the greenfield space and presumably had to pay for it because there wasn't leasing package then. They liked it. And in the meantime, Billy and Raymond and Elektravertz put together a package for leasing that they really like and that might be what they would have preferred to begin with and you're seeing the result of a

Speaker 1

strong leasing response. Is that

Speaker 7

kind of the way you think of it?

Speaker 2

I'd say you're pretty close. If you think about who uses this equipment, there's the big retailers who we are our bread and butter currently, and they generally know what they're looking for. They're looking at lifecycle costs. They want the best battery, and they really take our battery. Then there's third party logistics companies who are operating facilities or other parties.

Speaker 2

They are looking for five year contracts and the leasing model works extremely well for those types of customers. And that's what we're seeing this new attraction.

Speaker 7

Okay. That's really helpful. And my last question is kind of turning the tariff question around. Is there any fear that retaliatory tariffs, say in Japan or elsewhere in Asia, might slow down Elektra Bay's ability to export into that region?

Speaker 2

We don't think so. We'll see. Tariffs are make a lot of news. Thus far, there hasn't really been anything there. So we'll wait to see what happens.

Operator

Up next is Jeff Grampp with Alliance Global Partners. Please proceed, Jeff.

Speaker 6

Curious on the XM loan, does the timing of closing that, understanding it's hopefully in the next forty five, sixty days, but does the timing of that closing have any effect positively or negatively with respect to the timelines to operationalize either the system or sell manufacturing operations at Jamestown or are those largely independent events in a sense?

Speaker 2

Yes, I'd say they're independent events. We've already started placing the longest lead time orders for our own equipment. So, they're independent events.

Speaker 6

Okay, great. And my follow-up on the acceleration of the timeline to do the systems in Jamestown, pretty clear the benefits to the extent there's any tariffs or trade related kind of macro issues to deal with. But are there any business specific reasons outside of trade that it makes sense to accelerate into Jamestown. Can you hit on kind of the business specific operational benefit synergies, things of that nature, would that be helpful? Thanks.

Speaker 2

Yes. On the business side, we're trying to build up a team in Jamestown who will ultimately be building battery packs, battery modules and battery cells. So the sooner that team gets familiar with making battery systems, the better. So we're taking this as a good opportunity to get that started and in place. The second reason is capacity.

Speaker 2

We're seeing growth in demand and it makes sense instead of having another shift in Mississauga, start a first shift in Jamestown. So overall, it's a no brainer. You get out of your comfort zone a little bit, you got to train a new team and add in more equipment, but something we would do anyway.

Speaker 4

We also have a number

Speaker 1

of grants and tax incentives available to us in Jamestown. So, we're trying to utilize those sooner rather than later.

Speaker 6

Understood. And just a related one to sneak in, is the main accelerant human capital solution? I mean, is it basically hiring and training is the main bottleneck, if you will, and in terms of how fast you can accelerate startup there or what other factors are at play?

Speaker 2

That's the main one. The equipment, a lot of it's already been installed now. And the team there, the Head of Operations in Jamestown is extremely familiar with assembly of our batteries already. He has to train the rest of the team that he's hiring. And there'll be a lot of people going back and forth from Ontario to New York to enable that training.

Speaker 7

Got it. Perfect.

Speaker 6

Thank you guys for the time. Appreciate it.

Operator

The next question comes from Amit Dayal with H. C. Wainwright. Please proceed.

Speaker 8

Thank you. So with respect to the solid state batteries guys, is any of this in the hands of customers who may be testing it or is it still in the lab?

Speaker 2

It's still in the lab. We've refrained from sending it to customers just yet because we believe there's some more optimization to be done. But overall, I'm pleased with the progress the team has made. Cells are looking good. The technology fundamentally is good.

Speaker 2

It does require some iterative work, which takes time, and we want to make sure we get it right.

Speaker 8

Understood. And with respect to storage related opportunities, it seems like in prior calls, you had mentioned there were some promising opportunities that were being cultivated. Has any of that materialized? Or can we expect any of that to materialize in this fiscal year?

Speaker 2

Yes, there is. There is one project we're looking to have materialized this fiscal year. Currently, we're working out the details with a integration partner who's a large utility company or part of a large utility company. So we're working that out and also have to provide the end customer with a fully fledged proposal.

Speaker 8

Okay. And this is part of the

Speaker 2

There is interest for our products in that space. It's a market which I believe is still very price sensitive overall and hence we're we've been a little reticent to go after in a big way, but it's being driven by some of our key end customers who want to see this product.

Speaker 8

Okay, understood. Jamestown capacity, Raj, can you remind us what the capacity is and how you're planning to ramp operations there?

Speaker 2

Yes. In dollar terms, roughly, we'd say a $200,000,000 capacity ish, give or take. In terms of timeline, we'll start battery system assembly in April. We'll start the cell production, which is a capital intensive piece in mid-twenty twenty six. So the timeline has not changed from our last call.

Speaker 2

Okay.

Operator

Okay. We've reached the end of the question and answer session. I will now turn the call back over to management for any closing remarks.

Speaker 2

Well, that concludes our call, and thank you all for listening. We look forward to speaking again after we report our second quarter twenty twenty five results. Have a wonderful evening.

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