Electrovaya Inc. (ELVA) Earnings Call Transcript & Summary

Greetings, and welcome to Electrovaya's Annual and Special Meeting of Shareholders. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raj Das Gupta, CEO. Thank you, Raj. You may begin.

Welcome, everyone. We will now commence the Annual and Special Meeting of Shareholders of Electrovaya Inc. for the 2022 financial year. My name is Raj Das Gupta, and I'm 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. I will chair this meeting, and with the consent of the meeting, John Gibson of Electrovaya will act as Secretary of the meeting. As Chairman, I ask for the meeting now come to order. The first item of business will be the appointment of the 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 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 [indiscernible] 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 3, 2023, to each shareholder of the Corporation of record at the close of business on February 21, 2023.

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 meeting of shareholders of the corporation be taken as read and be entered into the minutes of this meeting as well.

I second the motion.

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

According to the bylaws of the Corporation, a quorum for any meeting of shareholders is at least 2 persons present and holding in 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.

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 March 25, 2022, 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 March 25, 2022, be approved?

I move that the minutes of the prior Annual Meeting of the Corporation held on March 25, 2022, be approved.

I second the motion.

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, 2022, 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, 2022, be dispensed with?

I move that the reading of the auditor's report on the audited financial statements of the Corporation be dispensed with.

I second the 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 the Directors for 2023, appoint Goodman & Associates LLP as auditor and pass a special resolution authorizing the consolidation of the company's issued and outstanding common shares. Each of these matters must be passed by not less than a majority of the votes cast by shareholders represented at the meeting in-person or by proxy. Based on the scrutineer's report, the proxies deposited authorizing me to vote in favor of each of the resolutions listed in the notice of the 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 nominations.

I nominate the following persons as Directors of the corporation: Sankar Das Gupta, Carolyn Hansson, James K. Jacobs, Kartick Kumar and Raj 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 Sankar Das Gupta, Carolyn Hansson, James K. Jacobs, Kartick Kumar and Raj Das Gupta to 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 company -- of the Corporation's bylaws.

I second the motion.

As 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 about for this purpose. I have 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 will declare that the motion be carried. The result of the poll will be included in the minutes of the meeting disclosed in a press release and filed on SEDAR in accordance with TSX rules and applicable laws. I direct that the scrutineers 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 auditor 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 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.

All in favor? Contrary, if any? I declare the motion carried. Thank you. The third item of business for which this meeting has been called is to consider, and if thought fit, pass a special resolution, authorizing the Board to amend the articles of Electrovaya Inc. the filing and implementation of which articles of amendment shall be entirely at the discretion of the Board of Directors, the effect of which amendment will be to consolidate the company's issued and outstanding common shares on the basis of one new common share for up to every 5 pre-consolidation common shares or such lower consolidation ratio as the Board may, in the future, determine and as may be accepted by the Toronto Stock Exchange as all more particularly described in the management information circular of Electrovaya Inc., dated February 21, 2023. May I have a motion approving the motion to consolidate common shares at the Board's discretion as set forth on Page 7 of the circular?

I move that the stock consolidation resolution described on Page 7 of the circular to be passed without amendment.

I second the motion.

All in favor? Contrary, if any? I declare the motion carried. Thank you. 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 the meeting, there will be a presentation by management, after which you will have an opportunity to submit questions via the Electrovaya webinar.

I move that this meeting be terminated.

I second the motion.

All in favor? Contrary, if any? I declare that this meeting be terminated. So John and I will be giving a short presentation. This presentation will also be available on Electrovaya's website at the end of today. [Break]

So just starting off with the disclaimer. Electrovaya is a publicly listed company on the Toronto Stock Exchange. Jason, previous slide, please. And we will be discussing things that are forward-looking, and please, we'll take this as read. So Electrovaya is a lithium-ion battery manufacturing company as well as technology company. So we have a key mission to participate in the energy transformation with both safer and better batteries, and we use both those terms carefully because we have technology which provides superior safety and superior cycle life. And so our lithium-ion battery products are ideally suited for a host of applications that need this superior performance. So Electrovaya has 2 key technology platforms. The first is our Infinity technology platform. So this is a technology that's based on our proprietary ceramic separator technology as well as accompanying cell design, cell assembly and electrolyte technologies. And what it does is it provides superior cycle life and vastly superior safety. And as a result of these 2 main differentiating factors, we're very focused on applications that can utilize -- that require both of them. So if you look at applications like material handling, these are vehicles that are operating 24/7 and are doing multiple cycles on batteries in a day, and as a result, cycle life is very key for that application. With respect to safety, it's also key because you have these types of vehicles operating in buildings with sometimes over $1 billion of merchandise within that site, and fires and safety incidents are not something that can be tolerated. We are also targeting other markets like electric buses and energy storage. These are markets that also have a high degree of focus on safety and cycle life. So we believe this is our core business in the Infinity technology platform, and currently, we're driving nearly 100% of our revenue from it. We're also working on a solid-state battery technology platform. We have some commonalities between our current commercialized technologies and that it's also based on ceramic-based separator technologies, utilizes a lot of know-how with respect to cell design and cell manufacturing. Well, Electrovaya has been in the battery industry for over 20 years. This is something that is a testament to our management and technology progress, and we've stayed in this very hyper-competitive market as many battery companies have failed. We're also looking like we're going to become extremely successful in the coming years. We are growing quickly. Our revenue last year in fiscal 2022 was nearly double the preceding year, and our guidance for fiscal 2023 is more than double the revenue of fiscal 2022. So we're growing very quickly. Some of you who are here in-person are visiting a new site in Mississauga, Ontario, which is getting significant renovations to improve capacity. We continue to file new patents. The company has over 100 patents in its portfolio, many of which are around separator technologies. Next slide. Currently, the company has 3 sites. So the site I'm speaking from is our headquarters in Mississauga, Ontario. This is a site where we're assembling battery systems as well as doing a significant engineering, development and design work. We have a second site, about 15 minutes from here, which is our Electrovaya lab site, and that site is dedicated to working on next-generation lithium-ion battery technology, especially the solid-state battery work. And our third site is our largest site. This is in -- this is a 52-acre site in New York State, which will ultimately become our main manufacturing site for cells and battery systems. So Electrovaya manufacturers, a host of key items, starting from the cell. Our cell is proprietary. It has unique performance, especially with regards to safety and cycle life, and this is the driving force for all of our products. We take that cell and we make them into modules. Some modules will be assembled here in Mississauga later this year, and those modules are typically being placed into battery systems in-house mostly for the material handling market. However, we're also launching our high-voltage packs later this year, which will be delivered for both energy storage and vehicle applications. The market size that we're participating in is large. Electrovaya previously had a key focus on the automotive space. However, since 2018, we've been hyper-focused on what I would call the heavy-duty segment. Now the heavy-duty segment is a multibillion dollar rapidly growing market. The largest piece of it for us currently is the material handling market, which, again, is a multibillion-dollar market that is going through a technology transition right now. So just a few years ago, well over 95% of the market was dominated by lead-acid battery technology for at least the electric forklifts, and this is starting to be displaced by lithium-ion battery technology for which we believe we're at the forefront. The electric bus market is a nascent market, but we believe this is going to become an important market in the coming years and one which we intend to participate in. And then finally, the energy storage market, it's already quite a large market, but growing very quickly. And again, it's a market we feel our technology is well suited for. In terms of how we are taking our batteries to market, a lot of it depends. A lot of it is driven by our OEM partnerships. We have a key partner with The Raymond Corporation, who we've been partnering with since 2020. I just came back from ProMat in Chicago yesterday, and they have our batteries in powering nearly every vehicle in their very large fleets. We are seeing battery deployments in a very broad range of customers across this continent and others. We're also delivering battery systems for automated guided vehicles and a few other applications. We are excited about the electric truck and bus market and the energy storage market as well, for which we'll be launching some products later this year. Going back to the core technology for a few slides here. The cell technology has cycle life up to about 4x typical lithium-ion batteries of the same chemistry, and this is really our key differentiating factor. The bar graph you see there is a battery system data from a key customer after 4 years of continuous operation, essentially no degradation on the battery capacity after that period of time. So putting in perspective, can you imagine if you use your phone 4 years nonstop if that battery was as good as new, that would be -- that's the type of technology Electrovaya is bringing to this market. Well, in summary, we bring the highest cycle life, which is the longevity, superior safety, a modular battery system approach where we can provide multiple battery models quite easily, and ultimately, this provides our customers a lower cost of ownership. We have a very large roster of Fortune 100 and Fortune 500 customers. To date, I think we have over or about 10 Fortune 100 customers. So that's 10% of the Fortune 100 list. That's a very significant milestone, and this is a growing customer list. Just giving everyone an idea of how sales progression can take place. We've taken on this slides 3 key large end users. The first was a Fortune 100 company in the retail space, where the opportunity size with this customer is massive, I would say, over 200 million in terms of potential battery deployments over the course of their warehouse fleet. Last, in 2021, we received about USD 2 million in orders. That expanded to about $16 million in orders last year, and we expect orders to be placed from that customer this year as well. Another one which we announced a few weeks ago was a Fortune 500 company. This company also has significant warehouse fleet. Last year, they ordered about $2 million worth of product, and this year, to date, they've already ordered about $15 million worth of products, which we expect to increase. And then the last example there, also an announcement we've made in the last couple of weeks. This is another Fortune 100 company with a significant warehouse fleet. They placed their first order this year for $3.4 million. Again, there's a significant opportunity for us to grow these deployments. On the separator technology, why does this provide a better level of safety. It's because our separator technology is stable at high temperatures. This allows -- or mitigates the cells from going to thermal runaway and really is demonstrated by our fire propagation testing at the pack level, where we've demonstrated a fire does not propagate cell to cell within our packs. This is a key differentiating factor for Electrovaya and one that I think is going to become more relevant in the years to come. So Electrovaya is going to be delivering high-voltage battery systems towards the end of this year. We are in the midst of installing an automated battery module and pack assembly line here in this building. This is actually being installed next week and has already passed its factory acceptance testing at our contractor. So we're very excited about how this will lead to more domestic assembly and more flexible production in-house. So our high-voltage battery systems are going to go into both energy storage systems as well as electric buses. We provide a differentiating factor in both these markets. First, of course, is the cycle life. That's extremely relevant for both markets because this impacts the overall cost of ownership for these developments. So in electric buses, the target is the battery meeting the vehicle life, and typical vehicle life for a bus is 12 to 16 years, and we believe we're the only battery provider that can provide a battery that meets that same life cycle. A similar opportunity presents itself in the energy storage space. Electrovaya wants to be a performance-based supplier in this market. We're not interested in being a low-cost provider. I'll briefly discuss some of our solid-state battery development. Here, Jason, next slide. The target is extremely high energy density, not really -- we're not really looking for extremely long cycle life. The core focus is on energy density. We're making good progress with this endeavor, and we're targeting over 350 watt hours per kilogram at the cell level. This is -- enables different markets. It won't be a technology we would use in the markets we're applying to the Infinity battery technology platform, but it could open up new markets. For instance, aerospace, high-performance vehicles and few other important markets. We're looking at both a hybrid approach where you have some aspects of a full solid-state battery with some aspects of conventional cell technology as well as a full solid-state battery technology. So we're looking at -- we're not rolling out either and our research team is working in both directions.

So we've mentioned quite often in the past about our expansion into New York State with the onset of the Jamestown Gigafactory. So we wanted to give a quick update on where we are in terms of financing our plans for the factory time lines for operation, et cetera. As of today, we have a term sheet received from a New York State consortium of lenders, covering 80% of the Stage 1 costs. We've explained in the past how we are -- we're building the plant in stages, so to not overinvest and underutilize the space and the capacity that's there. The plant will carry out both cell and module assembly as well as final test and final battery assembly. The time line for those would be the end of this year or the second half of 2023 for the final assembly and test portion and the first quarter -- first calendar quarter of 2025 for cell assembly and test. What we're really targeting in Jamestown is to mirror the operations of Mississauga in the short term to allow us to build a workforce, build efficiency, expand our capacity and meet the demands of the ever-increasing customer list, and we've already started the hiring process for that. We'll obviously release the information as it comes, and we're making very good progress with Jamestown.

So just to summarize our target milestones for 2023. Number one is to meet and/or exceed our guidance of $42 million for the fiscal year, which is more than double last year's revenue. We want to complete the financing process for the Jamestown Gigafactory. We want to demonstrate profitability for the current fiscal year, complete our NASDAQ listing and finally, continue to grow orders, enter new markets and establish new relationships.

So just a couple of comments on the financials. Everybody will have seen this. This was the same as -- we're at least at the end of fiscal Q1, but Electrovaya, as we know, hit a key turning point in fiscal Q4 last year when we hit the -- almost hit the $10 million mark for revenue. Historically, we've seen a significant downturn in the following quarter, which this year was not the case. We hit $7.7 million in revenue, which would have been more if we were able to deliver over the last couple of weeks of December. However, what we really saw here was a significant increase in the efficiency of production on the floor, which is key in targeting our guidance for the year. So that continued into Q2, and we're very confident that we can hit the guidance that we gave of $42 million and hopeful that we can be EBITDA positive and cash flow positive for the full fiscal year.

Yes. In summary, this will be our last slide, but Electrovaya is an exciting pure play battery technology and manufacturing company with a lot of IP, a lot of differentiating technology, and we are applying this to markets and making deliveries today. We have leading OEM partners. These are companies with billions of dollars of revenue, and they could have partnered with any battery company on the planet and they selected Electrovaya on the basis of our technology differentiation. We also have a lot of exciting work with respect to next-gen battery technology. We're growing our North American manufacturing footprint. We believe we will be in a position to tap some of the new government-based incentives like the Inflation Reduction Act. And finally, we're on a very sharp growth path with profit -- with a route to profitability. So we're overall very excited about what the future has for the company. With that, I think we'll conclude today's presentation.

With no questions, we will now end today's meeting. Thank you very much for attending.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.