Electrovaya Inc. (ELVA) Earnings Call Transcript & Summary

Good afternoon, welcome everyone. We will now commence the Annual and Special Meeting of Shareholders of Electrovaya Inc. for the 2021 financial year. My name is Sankar Das Gupta, and I am the President and Chief Executive Officer of Electrovaya. A brief presentation will be made at the end of this meeting regarding the business and affairs of the company, we will be pleased to answer any questions you have at that time. Now I will Chair this meeting and with the consent of the meeting Richard Halka of Electrovaya, will act as Secretary of the meeting. As Chairman, I ask that the meeting now come to order. The first item of business will be the appointment of scrutineers to report on the shareholders present in person or by proxy at this meeting or any adjournment thereof, to compute the votes cast on any poll taken at this meeting or any adjournment thereof and to report thereon to the Chairman. With the consent of the meeting, I will now appoint TSX Trust Company through its representatives to act as scrutineers. Would the secretary please report on the mailing of the notice calling this meeting.

Mr. Chairman, I table the declaration made by TSX Trust Company to the effect that the notice of this Annual and Special Meeting of Shareholders, the associated information circular and form of proxy solicited by management for use thereat were mailed on March 4, 2022, to each shareholder of the corporation of record at the close of business on February 18, 2022.

May I have a motion that the reading of the notice calling this Annual Meeting of Shareholders of the corporation be taken as read?

I move that the reading of the notice of the meeting of shareholders of the corporation be taken as read and be entered into the minutes of this meeting as such.

Mr. Chairman, I second the motion.

All in favor? Contrary, if any? I declare the motion carried. Would the Secretary please report whether there is a quorum present.

According to the bylaws of the corporation, a quorum for the meeting of shareholders is at least 2 persons present holding in the aggregate, not less than 25% of the total number of shares of the corporation entitled to vote at the meeting. In accordance with the preliminary attendance figures received from the scrutineers, we have a quorum of shareholders.

Thank you. I'm advised that there is a quorum present. Therefore, I declare this meeting to be regularly called and properly constituted for the transaction of business. Copies of the minutes of the prior annual meeting of the corporation held on February 17, 2021, have been prepared and are available for the shareholders to review. May I have a motion that the minutes of the prior annual meeting of the corporation held on February 17, 2021, be approved?

I move that the minutes of the prior annual meeting of the corporation held on February 17, 2021, be approved.

I second the motion.

Thank you. All in favor? Contrary, if any? I declare the motion carried. A copy of the financial statements of the corporation for the fiscal year ended September 30, 2021, and the auditor's report thereon is available to the meeting. May I have a motion that the reading of the auditor's report on the audited financial statements of the corporation for the fiscal year ended September 30, 2021, be dispensed with?

Mr. Chairman, I move that the reading of the auditor's report on the audited financial statements of the corporation be dispensed with.

I second that motion.

All in favor? Contrary, if any? I declare the motion carried. Continuing to the main business of the meeting, shareholders are asked to elect directors for 2022, appoint Goodman & Associates LLP as auditor and pass an ordinary resolution with respect to approving an amendment to the company's stock option plan to increase the fixed number of common shares issuable thereunder, all as more particularly described in the information circular. Each of these matters must be passed by not less than a majority of them both caused by shareholders represented at the meeting in person or by proxy. Based on the scrutineer's report, the proxy's deposited authorizing me to vote in favor of each of the resolutions listed in the notice of meeting sent to shareholders represent more than the votes necessary to pass all such resolutions. The first item of business is to consider, and if thought fit, pass an ordinary resolution to elect directors of the corporation. The number of directors to be elected at this meeting is 5, and I declare the meeting open for nomination.

I nominate the following persons as directors of the corporation: Sankar Das Gupta, Carolyn Hansson, James K. Jacobs, Kartick Kumar, Bejoy Das Gupta.

Are there any further nominations? Since there are no further nominations, I declare nominations closed. May I have a motion in favor of the election of the 5 persons nominated?

I move that Sankar Das Gupta, Carolyn Hansson, James K. Jacobs, Kartick Kumar and Bejoy Das Gupta be elected as directors of the corporation to hold office until the close of the next annual meeting of shareholders or until their successors are elected or appointed, subject to and in accordance with the provisions of the corporation's bylaws.

I second the motion.

Thank you. As per TSX rules require disclosure of relative percentages voted in favor of or withheld from each director at each meeting where directors are elected. Each shareholder present in person or represented by proxy has been provided a ballot for this purpose. I've been advised that based on the votes represented by proxy at this meeting, a sufficient number of votes have been cast for each of the nominees to elect each of them, and I declare the motion carried. The result of the poll will be included in the minutes of the meeting, will be disclosed in our press release and filed on SEDAR in accordance with TSX rules and applicable laws. I direct that the scrutineer's report as to voting upon the ballot be annexed to the minutes of this meeting. The second item of business is to consider and if thought fit, pass an ordinary resolution to appoint Goodman & Associates LLP as the corporation's auditors until the close of the next annual meeting, and to authorize the Board to fix the remuneration to be paid to the auditor. May I have a motion appointing Goodman & Associates LLP as auditor and to authorize the Board to fix their remuneration?

I move that Goodman & Associates LLP be appointed the company -- the corporation's auditors to hold office until the close of the next annual meeting of shareholders of the corporation and that the Board of Directors of the corporation be authorized to fix Goodman & Associates LLP's remuneration.

I second the motion.

Thank you. All in favor? Contrary, if any. I declare the motion carried. Thank you. The third item of business is to consider, and if acceptable pass a resolution approving an increase to the fixed number of shares issuable under the company's stock option plan from 23 million to 30 million, all as more particularly described in the circular. May I have a motion approving the stock option plan resolution set out in the circular?

I moved that the stock option plan resolution described in the circular be passed without amendment.

I second the motion.

Thank you. All in favor? Contrary, if any? I declare the motion carried. Before entertaining a motion for termination, I would ask if there is any further business to be brought before this meeting? As the formal business of this meeting has now been completed, I would ask for a motion that this meeting be terminated following the termination of this meeting, there will be a presentation by management.

I move that this meeting be terminated.

I second the motion.

Thank you. All in favor? Contrary, if any? I declare this meeting terminated. Thank you all.

We'll now be moving to the presentation portion. They'll just be about to a 5-minute break here while we get set up. But just to stay on the webinar, the presentation will be coming up. Thank you, all. [Break]

Hello, good afternoon, and I will do a presentation on where Electrovaya is, and give you a quick update. And I think the chats room will be open. So anybody wants any questions asked, Jason will be able to collect and sent it over. So thank you very much for coming over to -- on the Annual and Special Meeting. And this is a presentation being given by myself, Sankar Das Gupta. And also on the finances, we have Richard Halka, our EVP and CFO. We have a long disclaimer, and this disclaimer is also in our website. So anybody who is interested can, of course, read the disclaimer. So the first slide is battery is the enabling technology in the energy and electrification sector. This sector is now moving very, very quickly. For over the years, Electrovaya have been evangelist in this area, and we are really pleased to see that now the markets are finally emerging, both in North America and Europe, which is the place we are working. And how big is this technology? It's probably -- folks like Bloomberg has some suggestions of $540 billion, who knows. The more interesting thing for us at least is that Bloomberg uses the Electrovaya's battery photograph to illustrate its articles. Around -- a few years ago, around 2017, 2018, 2, 3 years ago, the work Electrovaya was doing, we came up with a fairly interesting technology breakthrough. And this technology breakthrough, we believe, is a very disruptive technology in this lithium ion battery sector. And the breakthrough was focused on 2 areas. One was on safety and one -- the other was longevity and cycle life. So we feel and believe that we have possibly the highest safety of any lithium ion batteries in this sector, with the longevity and cycle life without compromising our energy and power. So we give very high energy, very high power along with the safety and longevity. Now how important is safety? The focus on this sector used to be on energy density. Can we keep on increasing energy density? And what we are now finding that energy density is increasing, but safety is becoming a very paramount, important concern. And there's been a lot of work done by Electrovaya on the safety side, and our technology shows really excellent safety characteristics. We have a proprietary ceramic separator, with over 20-plus patents. And our technology is now operating in the Daimler's e-smart car fleet. And we believe there's about 20,000 of those Daimler electric smart cars running around, and, to our knowledge, with 0 battery safety incident. They must have done over 1 million -- sorry, 1 billion miles, this whole fleet, and we're really pleased that 0 safety incident coming from the battery. How important is safety, as folks would know, last year, almost it's the first year of production for 1 auto company, over 200,000 electric vehicles were recalled for battery safety. And electric vehicle battery safeties are expensive. There's an article with FT talking about just 1 auto company and 1 battery company spending about USD 1.9 billion to recall. So safety is probably a paramount importance, and it's becoming important more in the commercial vehicle space. Cars catching fire, yes, you can probably jump out, but buses catching fire is not a good thing. And commercial vehicles catching fire inside distribution centers, et cetera, is a disaster. So very, very important that thus safety is -- has to be the very highest. And the other important parameter is longevity, how long will the battery last. And we felt our safety and longevity was very, very important, and we were getting really industry-leading data on our safety and longevity. So we went to the largest OEM in this electric -- commercial electric vehicle space, which is in the materials handling space. So the OEM is Raymond Corporation, and -- who is a 100% subsidiary of Toyota and probably, globally, the largest group. And they did the testing, third-party testing, and they tested our cells, which is Electrovaya's cells in green, versus the best they could find -- available from Japan, Korea, China and elsewhere. So -- and as you can see, the cycle life or longevity of the Electrovaya cell, to their great surprise, is double, maybe longer than our competitors. So because of these 2 major differences, the safety and the longevity, Raymond Corporation decided to team with us. I should say the validation of this -- of the Electrovaya technology by them took more than -- took about 2 years to validate. So Electrovaya now is operating with 2 battery platforms. The first platform, we call it the Infinity platform. This is commercial today. And this platform has the highest safety and longevity without any compromising energy and power. And we are focusing on vehicles, which are using the battery with high usage, and we are focusing on the commercial vehicle front, which gives us the highest gross margins. And so where is our focus? Our focus is on materials handling vehicles. That's our #1 focus. And we feel the similarly, the battery, a safe battery, ultrasafe battery and a high longevity battery should be excellent for electric buses, electric trucks and these automated guided vehicles or robots and that's where our focus is. Our product has been launched, and we are very pleased to say that we have now got global partners and users whether it's Raymond, Walmart and so on. So this -- so our Infinity platform is commercial today, and we believe it's a very disruptive technology, and we are gaining market share quite nicely. The second platform, which is in development is a Solid-State platform. We have a division called Electrovaya Labs, and the Solid-State platform is in development. The Solid-State platform has a potential of giving the highest energy density of all batteries. And if that -- in that case, it essentially gives you very, very low initial cost per energy -- dollars per energy of the battery. And we believe this Solid-State platform will be of trust for the electric passenger cars. And electric passenger cars needs the lowest initial cost, the sticker price cost. And so we'll see how this development goes. A lot of interesting work happening here. We are building up a nice patent position also in this sector. So on the Infinity Platform, this has been commercially launched. We felt our battery was quite superior. So we went and now we are teamed up with Raymond Corporation. We have signed a strategic sales agreement, which was signed in December 2020, but really the activity of this has started in 2022 -- 1st of January of 2022. And Raymond has an excellent OEM sales channel, and we are now started marketing our batteries across their sales channel, both -- and if somebody is more interested, please go to Raymond Corp's -- their website. They have a Energy Solutions. They have a calculator, what is the rate of return you can get using the Electrovaya battery, and their ROI calculator shows very rapid returns. So -- ROI is a matter of months. So Raymond has now started distributing our product in a very large way. And next week, we are in the largest trade show where you'll be able to see our batteries, both at our booth and elsewhere, and that's happening in Atlanta, Georgia. In addition to the OEM channel, the second channel we are going after is a direct sales channel, where Electrovaya has its own people, own direct sales staff, and this is upgrading the battery. So here is 1 distribution center, which you can see the blue is the Electrovaya battery. This distribution center has probably got a few hundred trucks, and that whole distribution center moved to Electrovaya's battery. And this one is actually Walmarts. And the upgrade market is very large. There's potentially around 2 million lift trucks operating in U.S.A. or U.S.A., Canada and Mexico, and pretty much either using diesel or hydrogen fuel cells or lead acid batteries, and we believe they are prime for getting upgraded using Electrovaya. And we are really pleased that this sector is also now moving. So we are seeing rapid growth, very strong blue-chip customers. Home Depot, if you go to New York City, I think all the 5, 6, 7 stores are using -- the flagship stores are using Electrovaya. Walmart is a great customer, and Ben & Jerry's, the ice cream guys, it's an interesting customer really because there, the battery has to operate at very low temperatures. The charging is a minus 20. The battery is operating at minus 20. And I'm really pleased to see that the Electrovaya battery doing very well. And these names keep increasing. And fairly quickly, I think last time we put this map out, where is the operating sites? We are now rapidly grown to over 80 sites in North America, many of them repeat orders. And again, around the Northeast, around California, around Texas, and of course, Florida, Georgia, et cetera, plus Canada, and we are seeing sales happening in Mexico, and very early sales we are seeing in Argentina, Australia and elsewhere. So who are purchasing these -- of our batteries? The big users are coming in. It's the e-commerce folks, the high-velocity distribution centers, the cold freezer, ice cream folks, manufacturing industry, food processing industry, pretty much everywhere. And again, I should tell you that the addressable market is very large in this business. If you think of 2 million potential addressable market just in the U.S., our batteries are averaging approximately USD 15,000, maybe $18,000. Some batteries are -- priced at $30,000, $40,000 each, some are at $12,000 each. But if you take an average of $15,000, and if you got, let's say, even a $1 million addressable market, that's a $15 billion addressable market. So we believe this is probably, on a commercial basis, the largest addressable market today on lithium ion batteries. Now there are some other emerging batteries coming up and the electric buses, electric trucks will all come. And again, here, the reason why the materials handling vehicles are using Electrovaya is because of safety and longevity. In materials handling, a lot of the distribution centers are running our batteries and our trucks 24 hours a day, 7 days a week. So they are probably putting mileages of something like 300,000, 400,000, 500,000 kilometers a year, unlike passenger cars, which typically runs 20,000, 30,000, 40,000 kilometers in a year. So similarly is the electric buses and electric trucks. So we believe this market will come up. Will this market be as large as the materials handling market? Only time will tell, but we are very pleased that the markets are about to emerge. And we have a linkage with 1 OEM we have signed up with, and we'll see how this market emerges. So that's really on the Infinity battery platform. We are -- we have a strong research effort on a Solid-State platform. And we have formed a new division called Electrovaya Labs, and Electrovaya Labs has got research focused for the next-generation batteries. And we -- our focus is on 2 areas. One is on the Solid-State cells, which, we believe, the passenger -- electric passenger cars would be a big market for that Solid-State cells. And we also have a very interesting technology on an unique electric production process, which we had built and developed and now we are commercializing that process. So 2 very disruptive technologies are being developed in the Electrovaya labs. Very early data shows pretty good numbers, something like the cycle life is going well, and I think we'll be able to meet the passenger cars -- we are predicting it's meeting the passenger car demand requirements. On the financing side, we have Richard here. We'll see -- so we believe -- we've been an evangelist for many, many years with the markets in Europe and the markets in North America was not emerging. And I'm really pleased to see that the markets are emerging very nicely. 2022 should be a banner year for Electrovaya, and let's see how it all goes. You can see these figures in our website as well, both on an annual basis as well as on a quarterly basis. We had COVID and quite a bit of supply chain interruptions in the last 1 or 2 years. But we are holding steady on our revenue targets. The capital share structure, the shareholders and management and the Board of Directors are all aligned together. So the insider ownerships are around the 40% mark. So we are all aligned together. And we are trading in the Toronto Stock Exchange. We also have our OTCQB listing in the U.S. We've just elected our new Board of Directors, and we are very pleased. It's a very technical board, and quite correctly so because it's a very technology-driven company and it's important to be technology focused. But the Board has many years of experience in start-ups, in generating business, very astute Board as well. So in conclusion, Electrovaya has got a very interesting battery breakthrough. We are -- we believe it's a game changer, the Infinity battery platform. We are focusing on commercial vehicles, where safety and cycle life is generating higher value, higher margins for Electrovaya. And we deliver those batteries with excellent energy and power. We have a strong partnership with the Raymond Group. It is one of the largest global OEM in materials handling electric vehicles. And we now have a strategic supply agreement with them. They are a terrific company to work with. And we are seeing many, many Fortune 500 customers moving towards us, whether it's Walmart, Mondelez and various others. We believe the market for the commercial vehicles in the materials handling space, the addressable market is more than $10 billion, but we also see other emerging markets coming up in the electric buses, electric trucks. And being a very research-driven company, we have a strong research focus going on Solid-State battery platform under the Electrovaya Labs banner. And ultimately, all the work which our Board, our shareholders and us all wants us to do is this focus on climate change mitigation. And again, the lithium ion battery is the enabling technology in this area. So I will stop now, and thank you for joining our AGM and listening to our presentation.

Now we're going to take this opportunity to field a few questions and answers going to a question-and-answer period. We're just compiling a few questions. and getting that in front of our moderator, Richard, who will point out the questions that have come in through the Q&A tab of the webinar. Thank you.

Richard's also in this room.

Some confusion, but I think we're ready now. And by the way, thank you for your questions. There's quite a few coming in, but many of them followed along the same themes. So what I've done is boiled them down, and I'll just pose those questions to Sankar, and we will answer them. The first question asked by a number of individuals. Electrovaya has an important technology breakthrough, indeed a very disruptive technology in the lithium ion battery space. Why focus on electric materials handling vehicles?

Richard, thank you. When we pivoted from the passenger cars to the commercial vehicles, we felt we had a very excellent disruptive technology and -- because of safety and cycle life. So which sector, which industrial sector was large enough and which could support and give us the highest margins for our batteries? And absolutely, it's the materials handling sector. It's probably, after the passenger car, is the largest electric vehicle business in North America. People don't see it because it's all those vehicles are running inside buildings, inside distribution centers. And the market is enormous. It's tens of billions of dollars, and that market values very high technology. You cannot have a fire inside a distribution center. So they give excellent value for safety. And the second thing is because those vehicles are running 24 hours a day, sometimes 7 days a week, they are accumulating probably 1 million miles as against passenger cars running 100,000 months. So those folks need this great longevity. So Electrovaya is uniquely positioned in this area, and we are asking for reasonable gross margins for our batteries, and so that's why the focus is. It's a big market, big addressable market and decent margins where we are getting value for the technology we are producing.

We had another theme of questions around the electric bus market. And I will just pose those. How big could this market be? This market should meet Electrovaya's breakthrough battery in terms of safety and longevity. When will this market emerge?

The electric bus market, people see electric buses, unlikely they don't see the electric forklift that much. This is, in my opinion. I don't think the electric bus market will be as large as the electric materials handling market, but it's going to be an important market. We are seeing interest coming from both Canada and U.S.A., especially this electrification side. President Biden is planning large infrastructure spending on it, same as Canada's. And so we think this market will emerge. We are already positioned well in this market. We have got linkages with 1 OEM. And I suspect the market will start emerging by next year.

Thanks, Sankar. Since last September's exciting announcement on the work on Solid-State battery through Electrovaya labs, should we expect new update soon?

The Electrovaya Labs, we've got a dedicated folks working on the solid-state batteries. We're getting some interesting results, and our focus has been to build up our patent base, our intellectual property as strongly as possible. And the direction we have gone is increasing and improving the interface layers and make that Solid-State battery in a way which is manufacturable. So I'm hoping that we will be able to give you an update on the results we've received -- we're receiving now hopefully in the next couple of weeks.

Thanks, Sankar. We have 1 on the financial side, which I'll pose. Would you be raising equity capital to meet your growth objectives? I'm going to combine that with another one I had, which is regards to our guidance. And we think for this fiscal year, with regards to reaching our objective of $27 million of revenue for the fiscal year, we think that the increase that we've gotten in our facility to $11 million and simply basically using our working capital, cycling it through, taking it from inventory to sales, to receivables, to cash, will be adequate for our needs. With regards to an equity raise, that would be something we should consider going forward as we work through such things as expansion plans and should our growth continue at a rapid pace.

I tend to agree, we're really thankful to our financial -- our lender. He has increased our working capital from $7 million to $11 million. And as also our promissory note he has pushed it back. So we believe that gives us enough working capital to meet our growth targets. Now I've always got to say subject to because there's a lot of unexpected things happening in the world, whether it's COVID, which came and hopefully is now minimized. You have wars, and we're always worried about the supply chain disruptions, these -- which can happen. So both on the market side, we are very pleased that the markets are emerging nicely and our working capital has been improved by our lender.

Sankar, that concludes the questions I have.

Okay. Well, thank you very much for joining us, and have a wonderful weekend. Thank you.