Electrovaya Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Electrovaya delivered 67% year-over-year revenue growth to $17.1 million in Q3 FY25, marking its second consecutive profitable quarter with adjusted EBITDA of nearly $3 million (17% of revenue).
  • Positive Sentiment: The company secured over $21 million in new orders during the quarter—bringing nine-month bookings to $65 million—and reports a strong pipeline with multiple Fortune 500/100 partners.
  • Positive Sentiment: To meet rising demand, Electrovaya added a second shift at its Mississauga plant and began assembly at its Jamestown facility, which is on track to start cell production mid-next year and qualify for the 45X production tax credit.
  • Positive Sentiment: The company is expanding beyond material handling into robotics, airport ground equipment, Class 8 trucks, defense and plans to launch energy storage and recurring-revenue software solutions in FY26, leveraging its industry-leading Infinity technology.
  • Negative Sentiment: Gross margins dipped slightly to 30.8% in Q3 due to product mix shifts and tariff-related cost increases, though management expects to mitigate these pressures through scale and supplier negotiations.
AI Generated. May Contain Errors.
Earnings Conference Call
Electrovaya Q3 2025
00:00 / 00:00

There are 8 speakers on the call.

Operator

It is now my pleasure to turn the floor over to your host, John Gibson, Chief Financial Officer at Electrovaya. Sir, the floor is yours.

Speaker 1

Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q3 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 and nine month period ending 06/30/2025.

Speaker 1

If you would like a copy of the release, you can access it on our website. If you want to view our financial statements and management discussion and analysis, you can access those documents on the CEDAR Plus website at www.cedarplus.ca or on the SEC EDGAR website at sec.govedgar. 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 Q3 fiscal twenty twenty five results and the most recent annual information form and management discussion and analysis under risks and uncertainties, as well as in other public disclosure documents filed with the Canadian and American security regulatory authorities. Also, please note that all numbers discussed on this call are in U. S. Dollars unless otherwise noted. And now, I'd 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 Q3 fiscal year twenty twenty five quarter. The quarter marked another period of strong momentum for Electrovaya as we continued to deliver significant growth in revenue and profitability while advancing our industry leading Infinity technology into an expanded range of applications. We achieved a second consecutive quarterly profit with revenue growing 67% year over year to over $17,000,000 Importantly, our adjusted EBITDA was strong at nearly $3,000,000 and about 17% of revenue. We believe we can continue this growth trajectory into the current quarter and beyond as we leverage continuing demand growth from our core material handling sector and as we start seeing the contribution from other developing verticals.

Speaker 2

Operationally, we continue to see strong momentum from our OEM partners and leading end customers in the material handling sector. During the quarter, we secured more than $21,000,000 worth of orders, bringing total orders to over $65,000,000 in the nine months ending 06/30/2025. This steady order flow is backed by a much larger pipeline of projects, primarily with a number of major Fortune 500 and Fortune 100 end customers along with our OEM partners. To address increasing demand, we initiated a second shift at our Mississauga facilities in June and began some assembly operations at our Jamestown facility in May. These adjustments are expected to help us meet growing demand for our existing core battery systems, but also support the launch of new products for other sectors.

Speaker 2

Electrovide's advanced lithium ion battery technology is fundamental to our success. It offers industry leading cycle life, outstanding safety and competitive energy and power density. This provides a significant advantage for mission critical applications or those demanding superior safety and performance. We believe this is gaining increasing recognition in the industry, particularly as sectors valuing such performance, including e commerce, robotics and defense are poised for rapid growth. We are particularly focused on the robotics sector.

Speaker 2

Robots and autonomous vehicles are designed for continuous nonstop operation independent of human operators, which is critical to their overall value. Given that these devices often operate indoors and in large numbers, safety and reliability are also paramount. This sector is experiencing rapid growth fueled by advancements in AI technologies and the expansion of e commerce and is poised for further acceleration. We believe our technology is well suited to this market and we have the right product available at the right time. Currently, we have established partnerships with three impressive OEM partners in this space and we are actively pursuing additional business development opportunities with a number of exciting prospects in our pipeline.

Speaker 2

We recently announced our entry into the airport ground equipment sector, a development that has been in progress for some time. This sector leverages system design similar to those we've successfully implemented in the material handling space. The timing is also ideal as major airlines are actively seeking to reduce their carbon footprint in their ground operations. Our Infinity Lithium Ion battery technology offers the essential reliability and safety required by this mission critical industry. We're also excited to showcase several of our products at the upcoming GSE Expo in this September.

Speaker 2

Some of the largest battery systems that we are developing are for Class eight trucks. This is a sector that has struggled to be electrified in my in part, in my opinion, due to battery technology not being ready for the task. Cycle counts are high along with energy, power and safety requirements. These are factors that make it difficult particularly for standard automotive battery technologies to be used. We partnered recently with Janus Electric based in Australia to develop some custom high voltage battery systems for The U.

Speaker 2

S. And Australian markets with our first delivery scheduled in 2026. Our partnership with Sumitomo Corporation has been responsible for multiple high profile OEM wins in the construction and earthmoving equipment space. We are making shipments to our OEMs in Japan this quarter. These are customized battery modules that are being manufactured on an updated automated line in Mississauga.

Speaker 2

With our proven performance and technological edge coupled with our investments in domestic manufacturing, we identified the defense sector as a high value growth opportunity. We are actively expanding our collaboration with a global defense contractor, showcasing our superior safety and cycle life in a mission critical vehicle application. Our strategy includes a more aggressive pursuit of this sector bolstered by our upcoming U. S. Based manufacturing capabilities.

Speaker 2

We are also working towards launching some specialized energy storage products later this calendar year that have been designed to leverage our technological strengths and specifically target a growing demand for domestically produced high performance and importantly safe energy storage products. Investments in data centers, AI infrastructure and overall greater need for improved energy infrastructure is driving this demand, and we believe we can provide our solutions while maintaining the strong margins, which we have demonstrated in other verticals. Finally, we are also well on our way to launching multiple recurring revenue stream products in fiscal year twenty twenty six. This includes energy services and software based solutions. Given this, we anticipate separately itemizing these on our financial statements in fiscal year twenty twenty six.

Speaker 2

I'll now hand it over to John to review the financial results in more detail.

Speaker 1

Thanks, Raj. This quarter proved to be another wrecking briefing quarter for the company. Q3 represents significant progress in both our financial results and operational capabilities. We are steadily strengthening the financial foundation required to drive scalable and sustainable growth. Revenue for the quarter ended 06/30/2025 was $17,100,000 compared to $10,300,000 in the prior year, with revenue for the nine months ended 06/30/2025 at 43,300,000.0 compared to £33,100,000 in the prior year.

Speaker 1

Year over year growth of 67% for the quarter and 31% year to date. We have now surpassed our breakeven point of £50,000,000 having recorded almost £55,000,000 over the past twelve months. We continue to prove our ability to increase our run rate effectively and efficiently. As Raj mentioned, we've already received over $65,000,000 in purchase orders in the nine months ending June 30. With steady order intake and our enhanced working capital capabilities, we will continue to focus on efficient execution of orders.

Speaker 1

Gross margin for the quarter was 30.8%, a slight decrease from the prior year margin driven primarily by product mix and some increase in cost of sales. Nine month gross margins were 30.8% for 2025 and thirty two point four percent for 2024. Similar to the prior quarter, the company had some marginal increased costs on certain components due to tariffs. We continue to increase our production efficiency and optimization to limit or remove the impact of these increased costs. With increased production volumes, we are able to push for better pricing with our key suppliers.

Speaker 1

Management believes the company is well positioned to maintain these strong margins throughout Q4 and into the next fiscal year. Operating profit increased significantly for both the quarter and year to date. Operating profit for Q3 twenty twenty five was $2,000,000 compared to an operating loss of $600,000 for Q3 twenty twenty four. And for the nine months ended June, it was $33,200,000 compared to just $19,000 in the prior year. Our adjusted EBITDAS was $2,900,000 for the quarter compared to $600,000 in the prior year, with the nine month figure being $5,400,000 for 2025 and $2,600,000 for the prior year.

Speaker 1

EBITDA as a percentage of revenue was 17% for the quarter and 12.6 for the nine months ended June. Q3 also represented our ninth consecutive quarter of positive adjusted EBITDA. The company generated a net profit of CAD0.9 million for Q3 twenty twenty five, a significant increase from the net loss of CAD0.3 million in the prior year. Furthermore, the company generated a net profit for the nine months ending June of GBP 1,300,000.0 compared to a net loss of GBP 1,400,000.0 in the prior year. We have now had two consecutive quarters with a net profit, which management believes is a true inflection point for the company and reaffirms a message that we can achieve continued profitability.

Speaker 1

Further revenue growth, which we have line of sight off for the rest of the fiscal year, will further contribute to increased overall profitability. The company generated positive cash flow provided by operating activities of 5,400,000 and negative changes in working capital of £13,200,000 The movement in net changes in working capital is purely an invoice timing issue at the end of the quarter. To date, we have received a significant portion of this accounts receivable balance. The company ended Q3 twenty twenty five with positive net working capital of £31,800,000 compared to negative net working capital of £400,000 for the prior year, a significant increase and this demonstrates the continued improved financial and operational performance of the company and management is committed to continue this positive trend. At 06/30/2025, total debt was $18,800,000 compared to $18,400,000 in the prior year.

Speaker 1

In addition to cash on hand, the company had availability within its bank facility of over 6,000,000 Subsequent

Speaker 3

to the

Speaker 1

end of the quarter, the execution of warrants provided a cash inflow of $3,200,000 for the company. Management continues to manage cash conservatively and through the recent financings, we have seen a reduction in the cash interest costs for both quarter and the nine months ended June. We believe we have adequate liquidity to support our anticipated growth for the remainder of the fiscal year and into 2026. With respect to the Jamestown financing, we expect to receive the first draw from the Ex facility in the coming days. In order to take full advantage of the payment terms of Ex I'm, we have funded the early smaller payments ourselves, waiting until the first round of large payments to make the first draw.

Speaker 1

Under the credit agreement, we are able to recover all payments made relating to the project, so any payments made to suppliers will come back to us. Furthermore, with the interest only payment portion starting six months after the first draw, by doing this, we have pushed the start of interest payments into 2026 and the start of principal payments into 2027. That concludes the financial overview. I'll now turn the call over to Raj for concluding remarks.

Speaker 2

Thank you, John. Our foremost priority and most significant historical investment is the expansion of our manufacturing capabilities in Jamestown, New York. We are actively collaborating with our strategic equipment suppliers and contractors alongside developing our internal expertise and team to guarantee the project's seamless execution. We're confident that cell production in Jamestown will commence by mid next year as originally scheduled. Importantly, the recent One Big Beautiful Bill Act continued the 45x production tax credits, which our Jamestown output will be eligible for.

Speaker 2

This will help provide additional capital, which we did not take into account in the Ex I'm financing. Concurrently, we have been establishing robust supply chains, particularly those based in North America to cater to the needs of more sensitive customers, especially within the defense sector. Years ago, we proactively avoided Chinese supply chains for this initiative, encompassing both materials and equipment. This foresight will safeguard us from future disruptions and aligns us with the requirements of many of our strategic customers. Electrovaya's technology continues to lead the industry in safety and cycle life in particular.

Speaker 2

We are continuously enhancing this technology as evidenced by our recent UL 2,580 certifications for higher capacity battery systems, which demonstrate incremental increases in energy density. Furthermore, we are actively developing a next generation ceramic separator for our Infinity battery products. This innovation will offer several improvements, including enhanced thermal stability, reduced costs and decreased thickness. Our strategy involves increasing the domestic content of this crucial technology and ultimately scaling its production at our own facilities. We're collaborating with a domestic supplier of high purity alumina, which possesses exceptional properties to achieve this goal.

Speaker 2

The Electrovaya Labs team continues its primary mission on its solid state battery development. Encouraged by positive small cell results, we're investing in dry room facilities and additional equipment at our Mississauga labs. This expansion will enable the production of larger cells for sampling to potential customers. In closing, this quarter marked a significant milestone in our journey to becoming a leader in lithium ion batteries for heavy duty and mission critical applications. Our technology stands out, clearly demonstrating the essential attributes of cycle life and safety, which are increasingly vital in a rapidly growing automated industry.

Speaker 2

Coupled with our consistently strong financial results, we're clearly progressing towards our goals. That concludes our remarks this evening. John and I would now be pleased to hold a question and answer session.

Operator

Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Your first question is coming from Daniel Magdur from Raymond James.

Operator

Your line is live.

Speaker 4

Afternoon, gents, and congrats on the quarter.

Speaker 2

Daniel. Thanks.

Speaker 4

Obviously, a lot of success in the quarter expanding into new verticals with a number of announcements. How do you think about the change in or a potential change in the revenue makeup in '26 as a result or these longer term?

Speaker 2

'26 is going to represent these other verticals are going to be a significant contributor to revenue in fiscal twenty six. It's hard to predict exactly what percentage of revenue they're going to make, but for instance, on the robotic vertical, significant shipments will start to at least one of our OEM customers starting next quarter. And that space, the battery systems are generally quite similar to each other. So we can launch products more quickly. And so I think that sector is going to grow nicely.

Speaker 2

Airport ground equipment is another one which I think can, generate revenue rather quickly as well, given that the product is basically ready to go. We're we're going to be shipping first units within the next week or two. So that product line is good to go as well. On construction, with the construction OEMs in Japan, We've already been shipping and this is sort of at the preproduction level. And so fiscal twenty twenty six, that should scale a little bit.

Speaker 2

So when you take all these into account, they start adding up.

Speaker 4

Yeah. I guess in terms of customer types with these new verticals, obviously, on the material handling side, discussions with Fortune one hundred companies, Is it a similar makeup of the type of new customers that you're having these discussions with?

Speaker 2

For the most part, they're the OEMs themselves, and that's what we're focusing on. For instance, robotics is the OEMs that we're talking to mostly in terms of and same thing with the other sectors, especially, of course, defense would be like that. So it's a little bit different than the material handling space where we have direct relations with some of those major end customers. The exception to that is on the energy storage side of things, where some of those same customers are the ones who have expressed interest in our energy storage products. So we will sell those same end customers we're selling batteries for their material handling vehicles.

Speaker 2

We may sell those same customers energy storage solutions.

Speaker 4

Well, thanks for that. And then I'll jump back in queue.

Operator

Thank you. Your next question is coming from Eric Stine from Craig Hallum. Your line is live.

Speaker 5

Hi, Raj. Hi, John. Eric. Hey. So maybe just sticking with energy storage, I noticed that you did not call that out just in your written release.

Speaker 5

But clearly, a huge opportunity, especially since it is with many of your Material Handling customers. I mean, the fact that you did not include it, should we view that one as a little bit further out? Maybe remind us of the timing of the contribution there. And I mean, I would think it's safe to say that, that vertical might be the largest of any of your emerging verticals.

Speaker 2

Yeah, we'll be making a separate launch of that product fairly soon. So, that's why we haven't put it as a separate item in our press release. But it's product line which where our engineering team has been working on for some time. We want to make sure the specifications, everything is perfect before we launch it.

Speaker 5

Got it. I mean, any I would think that your customers have given you some indications about demand levels or deployments at some of the same locations that you are deploying your material handling solutions?

Speaker 2

They most certainly have. So we will make deployments in calendar year 2026 with this. We will make shipments next year.

Speaker 6

So

Speaker 2

it's a sector which is obviously very, very large, growing very quickly. We want to maintain our value there. We're providing a battery solution which is much safer, longer lasting than what you can find from competitors. And thus, we want to be able to secure strong margins, which is in that space, it's a more commoditized space in general. So we're going to be an outlier there.

Speaker 2

But we already have the strong relationships with some of those very large corporations, which are investing significant sums in this area.

Speaker 6

Yes. All

Speaker 5

right. Thanks for that. Maybe just on the capacity addition in Mississauga, and then you combine that with Jamestown, maybe with those two steps where your capacity stands. And then just thinking longer term, I mean, is the eventual goal to just move everything on the manufacturing side to Jamestown, Mississauga more of an engineering facility? Or how should we think about that?

Speaker 2

Yes. So first of all, we've added a second shift here in Mississauga. We've and we've started some and growing operations in Jamestown. That is to meet if if we're taking in a fair bit more orders than we're shipping, and so we need to catch up on that. So we're scaling things.

Speaker 2

That second shift is likely going to be a permanent piece and Jamestown is only going to continue to increase its contribution. So that's what we're doing on the capacity front in the very near term. In terms of the longer term vision that we have, Mississauga is clearly engineering development is its main priority, but we will leverage its system manufacturing as well, because it's well optimized to do that. If you think about these verticals which are launching products into, a lot of them are new types of battery systems and makes sense to utilize Jamestown more for those verticals as opposed to the Mississauga site, which is well optimized to provide battery systems for the material handling space.

Speaker 5

Okay. Last one for me. Just curious, I mean, great order momentum here throughout the fiscal year. I mean, is that I would assume that that has continued in Q4?

Speaker 2

It certainly has. So we haven't seen any its order intakes are continuing to be rapid, especially with, some of our key end customers, which are generally very large corporations. And so they've continued to provide us good order flow. And we're also seeing them provide us some sort of give us more guidance to what's going to happen over the next year to twenty four months. So we are very, very confident in this space as it stands.

Speaker 2

And so it gives us confidence with these investments we're making in Jamestown, etcetera.

Speaker 1

Okay. Thank you.

Operator

Thank you. Your next question is coming from Craig Irwin from ROTH Capital Partners. Your line is live.

Speaker 2

Good evening and thanks for taking my questions. Suraj, a lot of investors are asking us about your participation in the robotics market. And we've been pointing them to your very early work with the e commerce guys, guess, one in particular that's a little bit of a pioneer here. Can you maybe help us understand the breadth of applications that you're looking at in robotics? There is some enthusiasm out there for certain applications that could really explode, see tremendous adoption over the next couple of years.

Speaker 2

For example, the Tesla humanoid, the supply chain is talking about 30,000,000 units, which would be incredible. Can you maybe give us color on whether or not you're touching some of these applications that could see some very rapid growth over the next five to ten years? And the customers you're working with, I know many of them are iterative and they work from sort of lower risk to higher risk opportunities. Can you maybe talk about how you would see this evolve? Yeah.

Speaker 2

It's very dynamic, Craig. But what's common to all these robots is they need to wirelessly charge. They need batteries which can do many charges in a day because they operate to make a robot worthwhile, it has to do a lot of work. So they'll have to do multiple cycles in a day, and they need that battery to be very safe so they don't damage this very expensive piece of equipment. And so we meet those requirements, and we're already in a number of again, the sector is is still is is growing very quickly.

Speaker 2

It's still it's it's sort of the early stages. Most of the robots that we're in right now, I would say, are moving goods inside warehouses and factory floors. But we're seeing some which are in surveillance, one which is a defense type of application. We don't really have a clear idea what it is. And I I might you know, the battery is the same whether it goes into one or the other.

Speaker 2

So humanoid type robots in the future would definitely not rule it out. The typical battery that's going into these types of applications is roughly about two to five kilowatt hours. That's sort of what we're specking. So for us, they're relatively small, but the number of them could be very large, and that's what we're anticipating. So we're sort of standardizing the product to some degree, and it's getting a good reception in the market.

Speaker 2

We have a pipeline of partners we're talking to who are looking to test this technology we have, and we'll see how that goes. But we're very bullish on the space in general. It's a very good fit for us, both from a technological standpoint and on the product side, we're good to go. And so the initial partners we have, there's two in The United States. One of them is in Japan.

Speaker 2

And then there's a few guys that could come soon. Excellent. Excellent. The other market, sort of the other end of the spectrum. Eric asked the question about energy storage, rail, electric locomotives take huge batteries if they're going to be battery powered for a couple of miles.

Speaker 2

And you did have some projects that were in development. Can you maybe update us on where those stand? I know there's often shifting customer priorities, but do you still expect to maybe make some deliveries there? And is there opportunity for customer projects to commercialize? Yeah.

Speaker 2

REAL is one where it's very sensitive to government incentives. And so we did have a partner there, but I think they had some government money which disappeared. So I see it as an interesting opportunity. It works well with our battery technology at the end of the day. Hybridized rail is probably an area that is more realistic and one where we're in discussions with one partner there.

Speaker 2

But we'll see how it goes. I think I'm more bullish. If it's the same battery end of the day, whether it goes into a rail vehicle or a different type of vehicle, the Class eight trucks is probably a better place. That's a beautiful segue to my last question. Over the last many years, you've been generally cautious about electric vehicles, electric trucks, conservative in the amount of R and D dollars that you specifically applied to developing products for this market.

Speaker 2

This call, you're really calling that out just now and multiple times in prepared remarks and other answers to other questions. What do you think about the approach of the OEMs now that are doing electric trucks? It seems that if they're coming to Electrovaya, they're willing to pay for performance and that they understand they need that performance. Has something fundamentally changed in this market that makes it more attractive for you? While I guess, equity investors often look at this as maybe out of focus right now given challenges of many of the companies that raise money as SPAC mergers?

Speaker 2

Yes. I would we're cautiously optimistic about the space. I think the reason we got pulled in is precisely because of the failures of our some of our competitors in the space, right? So you cannot what we're finding is those who have applied standard automotive batteries, scaled them up to much larger capacities, and put them in these types of vehicles have run into problems, whether they be safety or performance. And that's really put a black mark on electrified class A vehicles.

Speaker 2

What we provide is a battery which can be safe in larger sizes, which can handle very high duty cycles. And that's what this market needs. So I believe that there will be a market for electrified trucks, Class A trucks. Certainly, it's not going to be the majority of the market. But I believe our technology, again, it's the right fit for the space.

Speaker 2

We'll see how it goes. We're not putting all our eggs in this basket for certain. The development we've done for this space is really leveraging the development we already have been doing for a defense customer, which is also large vehicles. And so that's what we're utilizing for the space. Great.

Speaker 2

Well, congratulations on another positive profitable quarter. So great progress.

Speaker 7

Thanks, Craig.

Operator

Thank you. Your next question is coming from Amit Dayal from H. C. Wainwright. Your line is live.

Speaker 3

Thank you. Good afternoon, everyone. Congrats on another solid quarter. With regards to the guidance, Raj, you're maintaining it at $60,000,000 in revenues for this fiscal year. That's implying roughly sort of a flat quarter in Q4.

Speaker 3

But does the color on the call seems to be, you know, more optimistic. Just wondering, you know, is there a reason for you to be a little conservative?

Speaker 2

We're we're gonna beat that guidance. We thought about revising it and didn't necessarily see the great urgency to do so. But this quarter, q four fiscal year twenty five will be will be a growth quarter over fiscal year q

Speaker 3

Understood. Okay, that's good to hear. And then just on the same lines, now that you are potentially going to see contribution from many new verticals next year, And as long as this material handling business stays this year's level and even growing a little bit from here, I mean, what kind of growth should we be looking for? You have the balance sheet now, you have the production facility. You can really step on the gas.

Speaker 3

So I'm just trying to see if there is any color you can provide for how growth next year could look for you guys?

Speaker 2

We're evaluating that Amit. It's a really it's changing so it can change on a dime. Right? What we're anticipating is our core sector, the material handling space, we'll see year over year growth. It's the other sectors where that growth rate is still unclear because they're just a little less mature for us.

Speaker 2

So I think by the end of the year, by the end of the calendar year, we'll have better clarity on how that's shaping up. But what we can tell you is we're gonna continue growing. We're going to continue outperforming what we're doing continuously.

Speaker 3

Understood. Is this potentially beginning in the next fiscal year or a little bit later? Just trying to understand how these products are going to be sold. Are these attached to the battery systems you are selling to customers or separately? Just trying to get a sense of you know, what the profile of this sort of recurring revenue segment will look like.

Speaker 2

Okay. So on recurring revenue, there's really two main parts to it that we're targeting. One is services associated with energy management. Right? So we're rolling we already have data analytics, which we have some Fortune 100 companies buying that from us, that service.

Speaker 2

And that's a relatively inexpensive service we provide. What we're launching in the fall will be demand AI driven demand response system, which will allow end customers to save on electricity, while without seeing any reduction in performance. And that's a service we anticipate being able to generate meaningful continuous recurring revenue. So that's one product which we'll be launching. The other more complicated one probably is our energy services product, which is one we're working towards and one which will be directed more to some of these end customers which want to treat the battery as an energy service.

Speaker 2

So they would prefer to pay instead of looking at a CapEx, they would look to utilize our technology as an OpEx. And given the strength of our technology, that's something that in the long run is very beneficial. Because when you sell one Electrovaya sells a battery for a warehouse application, for instance, the battery performance is so good, it takes a long time to get a repeat business. And that's something we're looking to leverage here with this. So for this battery as a service model,

Speaker 3

will those batteries be on your balance sheet then for the duration of those contracts?

Speaker 2

Potentially, that's something that still might be a special purpose vehicle with a third party investor where we take part in the benefit, but not necessarily have it all on our shoulders there. It's something that's still being looked at, so we haven't finalized. What I can tell you is the profitability of this is much, much greater. Understood.

Speaker 3

Thank you for that. Yeah, that's all I have, guys.

Speaker 1

I will step back in queue. Thank you.

Operator

Thank you. Your next question is coming from Jeffrey Campbell from Seaport Research. Your line is live.

Speaker 7

First of all, congratulations on a very strong quarter and appreciate the encouraging guidance for the fourth quarter as well. I wanted to start with the the Janus partnership. This appears to be a swappable battery approach if I read it correctly and it was first pioneered in Israel years ago and then it seems to be really gaining steam in China. So if I'm correct do you see this swappable approach working in Australia? And you also mentioned in your remarks that there's an eye to The U.

Speaker 7

Market with this as well. I was wondering, would that be similar effort, maybe geared towards long haul trucking? Or could this be something that would take advantage of distribution with any of your material handling relationship customers in The US?

Speaker 2

So Janice has this approach of swapping the batteries, and this enables them to serve their customer needs, whether going long distances, they need the power immediately. And I think it's a if you want to do that, you need a battery which can handle very, very high utilization rates, which ours is a perfect fit. You also need batteries which are, of course, safer if you're doing a lot of movement. And so that's what we're supporting them with. I don't really have a strong opinion whether swapping is good or I don't really have a strong opinion on the application.

Speaker 7

Well, then I just wanna ask again then. What what what did you mean when you said that you're working with them, but you're also in Australia and The US market?

Speaker 2

So they already have a a large number of customers in Australia, and they have customers in California. And so that's what we so, when we deploy batteries, it will be for both markets.

Speaker 7

Okay. That's helpful. Thank you. Give me a second here. Can you provide an update on your leasing business?

Speaker 7

Seems to be the one that was most poised to participate in the long term trend of lead acid battery replacement with Infinity Battery last time we discussed?

Speaker 2

Yeah, that's leasing from our OEM partner.

Speaker 6

So

Speaker 2

they're taking advantage of the performance of our batteries by providing a higher residual value on the leasing. So while, you know, if you're a Fortune 100 company, you're typically not leasing these batteries. But for midsize to large companies, they're often looking to lease and because the residual value of our batteries is higher, that makes the leasing through the OEMs quite attractive. And so that leasing program with Toyota was launched really start of this year. It's been very successful and is driving most of our orders for that brand.

Speaker 7

And one of the reasons I wanted to ask about this is because it sounded like in your last remarks to admit that you're looking toward some kind of similar leasing program of your own. And I'm wondering if the leasing that you were talking about there at the end, would that be towards new customers with some sort of a new model? Or would that even start to revert to OEMs, established OEMs that you have in material handling?

Speaker 2

I don't think we would launch our own leasing program because that's something financial institutions like the Toyota ones, the Toyota Finance is managing that. Leasing per se, no. Energy as a service, yes. It's a little bit more nuanced and that's something we're more interested in. If a customer wants to lease though, we do have good partnerships.

Speaker 2

Like we have one with Sumitomo Corporation where they're actively providing, some customers with with, lease proposal.

Speaker 7

Okay. No. That's very helpful. Thank you.

Operator

Thank you. And once again, everyone, if you have any questions or comments, please press star then one on your phone. Your next question is coming from Oren Hirschman from AIGH. Your line is live.

Speaker 6

Hi. Congratulations again on the progress. Just a couple of random questions. Just in terms of the I know you've been asked this question a few different times, but I'll put a different spin on it. In terms of selling into the energy storage market, in terms of actual sales, you mentioned customer authority material handling.

Speaker 6

Have you actually sold anything to them or do you have a first sight? That's part A. And part B would be, you know, it's going to be a premium product like you said. Does that mean it would be not it would residing, let's say, a lithium battery farm for an energy application, but it would be more likely be where there's more humans closer to a warehouse or something like that?

Speaker 2

Yeah. Or in both you're correct on both. So on now in terms of the project specifically, we have three customers who want to have this product. They are waiting on us to provide them final specifications, pricing, and delivery schedules before they move forward or not. So the onus is on us.

Speaker 2

That will come with our launch, which will be fairly soon. Again, we just wanna make sure it's, all buttoned up before it gets launched.

Speaker 6

Yeah. Appreciate it.

Speaker 2

On the on the sites they're considering, yeah, it's it's not the it's not these very large utility scale type storage sites that we're targeting. It would be specifically, for instance, warehouses. There were These warehouses typically have diesel gensets outside, a lot of them have solar on their roofs, so that'd be one type of application. Another would be data centers. A lot of these companies are building data centers and data centers are very expensive.

Speaker 2

You don't want to have any fire hazards nearby. So those are it's sort of that's what we're seeing the interest around that. Maybe another third area would be somewhat related to more government based procurements too.

Speaker 6

The data center would be a target or one of those first three is data center related?

Speaker 2

It may be. We we don't. One of those three one of the three companies has, has data a lot of data centers.

Speaker 6

K. Meaning, they they realize the the fire aspect of it in terms of the safety that's why you can command a premium?

Speaker 2

We think so.

Speaker 6

Yeah. Okay. Skipping skipping back to the the the ceramic separator technology. Is that to get a better gross margin? Is it gonna improve the actual performance?

Speaker 6

What's the purpose of doing all of that?

Speaker 2

It's Tim. We have the technology. When you have a good technology, you always want to make it better. And so we also want to improve the margins of it. Right now, the cost of what we produce leverages a lot of contract manufacturing and is very expensive.

Speaker 2

By by this, this, focus here, we will improve the the margins.

Speaker 6

Is it something that's notable where it might make a one or 2% type of difference on your COGS or it's not that big?

Speaker 2

It'll make a difference. It's also a lot of it is strategic. Right? If we have it in house, if we're, producing the alumina, either with a partner or or, you know, ourselves, that that's that's very valuable. Where so, you know, Martin, one way of looking at it is we're more than just a a battery company.

Speaker 2

We become a advanced materials company in a way. And Mhmm. This is, something that is is, in the long run, a very, very valuable.

Speaker 6

K. And just skipping to the robotics that people have asked about, is is that a business that's even a million or two today? And do you think it could be, you know, bigger than that next year? Do you have any line of sight?

Speaker 2

Yeah. It's about it's about like a million or two today, and, we expect it to grow quickly.

Speaker 6

Do you actually have line of sight into actual, you know, robotic ramps? And, again, I assume these are these are not humanoids. Right? We're talking about, you know, advanced warehouse type of robots?

Speaker 2

Yeah. These are advanced warehouse type robots. A few of them have given us, projections for next year. So we we we can see a ramp.

Speaker 6

Okay. And and is this coming from are they captive? Meaning, you know, is a big company that actually you know, they own the warehouses or they're in the warehouses that's actually also building the robots, or is the robot builder totally separate from the ultimate end customer?

Speaker 2

We're we're hoping we can get that one you're describing. But, no, these are these are, OEM built vehicles which are provided to other customers.

Speaker 6

Okay. Are they big OEMs? Some of them are startups?

Speaker 2

No. These are, they're all three of them are big OEMs. Yeah.

Speaker 6

Okay. And last question, and I can't resist on the solid state. You've got a lot on your plate right now. Any comments on the solid state R and D?

Speaker 2

So the team at our labs division has a product, which is, I would say, ready to go. What's stopping us from getting it tested is they're producing it in sort of suboptimal conditions. And, given that the performance looks good under those conditions, we decided let's invest some money, improve those facilities and equipment and get some samples sent to potential customers.

Speaker 6

I think the last again, it's been a while since you updated on charge and discharges and those kind of metrics. It wasn't anywhere close to going back a year or two ago, it wasn't anywhere close to being ready commercially, although it was still a large number of charge discharge. Have you made significant progress on that?

Speaker 2

We've made progress on so if you look at which applications are most interested in this type of battery, the number one would be, aerospace and drones. And the cycle count isn't really what they're looking for. They're looking for okay. They wanna have a couple 100 cycles. We can do that.

Speaker 2

They want rate capability, they want performance, etcetera. So I think we have it. I think the results we're getting point in the direction where we will meet those attributes. But we do have this suboptimal lab condition, which needs to be upgraded to get those better results.

Speaker 6

If I can just follow-up and end on this question, I was gonna ask you about the drone business in general. Obviously, you know, time and flight and power consumption is critical for drones, and it's a big problem. You know, they gotta come back refuel. People trying to do refueling in air, so to speak, recharging in air. So do you have any drone business today?

Speaker 6

And is this is this solid state that are really the key to that drone business?

Speaker 2

If you look at some of our competitors, there's there's companies who have shown success with silicon anode type cells. And we think ours could be a rival to that. It won't be silicon anode, would be a lithium metal anode. So probably even higher energy densities. So that's what we're targeting.

Speaker 2

We haven't we wanna get it right before we so so we wanna get the samples to to the potential customers before we push it.

Speaker 6

But there is no drone business today. That would be your entry into into that business. Correct.

Speaker 2

Yeah. Right now, we don't other than robotics, which you can say is, you know, land based drone. But, yeah, in terms of

Speaker 3

the

Speaker 2

flying drones, no. We have no business there right now.

Speaker 6

K. And congratulations on so much progress.

Speaker 2

Thanks, Orin.

Operator

Thank you. That completes our Q and A session. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

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