Electrovaya Inc. (ELVA) Earnings Call Transcript & Summary

Thank you, everybody, for joining our webinar today with Electrovaya. The purpose of today's presentation is to give our audience a better understanding of the business through a presentation and then questions with management. The presentation is going to be led by Raj Das Gupta, CEO, who is also joined on the call by John Gibson, Chief Financial Officer; as well as Christopher Filewski with Bristol Capital. you'd like a copy of today's presentation, simply e-mail me at [email protected]. We'll break for questions at the end of the formal presentation. And when we do break, we encourage those questions. As a reminder, we're only going to take questions through the webinar portal. If you happen to be listening over the telephone, please access the web link that you would have received earlier today. Remember the text box within the portal at any time. I'll ask the questions on the air for everyone to hear and Raj or John will answer. I'm not going to reference any names, but simply read the questions asked. And as we do have a very large audience today, if I can't get to your question online and has not yet been addressed during the call and can’t be, I'll come back to you through e-mail. I won't read the forward-looking statements, but I do state that they apply, and I reference them on Page 2 of this PowerPoint. And with that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. And now I'll turn the call over to Raj to start his part of the discussion and presentation.

Thanks, Glen. Thanks so much for the introduction and hosting today's webinar. Pleased to be back here for our second webinar. The last one, I think, was nearly about 6 months ago. A lot has happened at Electrovaya over that period, and we're very excited about the overall trajectory of our business. As Glen just stated, we're going to be going through a presentation, which will mention forward-looking statements. And as such, we would take this safe harbor statement as read. And of course, we're listed on both the NASDAQ and the Toronto Stock Exchange under the ticker ELVA. Now just for those who don't know Electrovaya, we are a lithium-ion battery manufacturing and technology company with a lot of exciting technology, which we're deploying today. We are highly differentiated from our competition. As those who follow the lithium-ion battery space may know, the industry is heavily dominated by Asian, especially Chinese battery companies. And those companies are very much focused on scale and cost. And on the vertical they're after, it's really the automotive industry is the primary target. Electrovaya has participated in those industries, and we found we can leverage our proprietary technologies and sell our battery solutions on performance and as opposed to being commodity-driven product. And as a result, we focus on mission-critical applications for our lithium-ion batteries. These are applications where they need better safety and better longevity, and we'll pay more for that. So we have consistently achieved over 30% gross margins in an industry which typically has under 10% margins. We are supplying some of the world's largest companies, including 16 of the Fortune 100 corporations in the world. Just this morning, we announced a follow-on order from one of such companies where we're -- we've received over $16 million worth of orders from them just in the last few months. We're targeting a large addressable markets, which need better safety and cycle life. This includes industries like Material Handling, where warehouses, especially e-commerce warehouses, which operate 24/7 need batteries, which last longer and do not catch fire. We tick both those boxes clearly. We're also targeting other key markets, including defense, certain commercial vehicles, airport ground equipment. And more recently, we're starting to look at energy storage. In terms of domestic manufacturing, that's something that is becoming more and more important as time goes on, and Electrovaya clearly made some intelligent decisions a few years back. We're well underway in setting up a large giga plant in Jamestown, New York, which will be our main manufacturing base and our products, therefore, are all -- will become all made in the U.S.A. Then in terms of financial performance, we've had some key inflection points achieved over the last several months. We had already -- today, we have demonstrated 8 consecutive quarters of positive EBITDA. And our last quarter, which was announced just in last month, was a first for profitability. We had a net profit. We also demonstrated 40% year-on-year growth, which we expect to continue across the remainder of the fiscal year. And this type of revenue growth positions us for sustained profitability going forward, again, highly unusual in the lithium-ion battery and cleantech space. So where does Electrovaya land in the competitive landscape? We have 2 very strong competitive advantages with regards to performance: The first is around safety. Electrovaya batteries feature, our proprietary ceramic separator technology, which we've deployed in over 30,000 battery systems with a perfect safety record. Not a single one of our battery systems with this technology has had any type of battery safety event. The second is on longevity. Our batteries will cycle much longer than typical lithium-ion batteries. Those of you may be fairly familiar with your phone, you may do 1 cycle a day on your phone and within 2 years, maybe a bit longer if you're lucky, you need to get a new battery in that phone. Our batteries -- so putting that into perspective, that might be 1,000 cycles. Our batteries in various applications are designed to do 10,000 to 15,000 cycles before they reach their end of life, making it a huge advantage for robotics, for Material Handling, many types of applications that need longer cycle life. The next 2 is production. So the domestic supply chain that we have developed is also becoming a competitive advantage, especially as geopolitical situations are making it more difficult for companies to procure from China, especially, and gives us a leg up over many of our competitors. And lastly, our products, while they be more expensive on a capital cost basis, when you take into account life cycle costs, we have a lower cost option here. So our batteries when you look at life cycle costs are less expensive than typical lithium-ion batteries. When it comes to safety, lithium-ion batteries have had a checkered history. And lithium-ion batteries all have a problem where if a fire starts in a lithium-ion battery cell, it's very difficult to stop that fire from continuing and propagating or in the battery industry, they refer to as thermal runaway. And there are many instances of this, you can look online. But typically, let's say, a lithium-ion cell catches fire. What happens or some -- or if a short circuit happens to that cell? And what is common is the cell gets too hot, the separator within that cell will start to shrink once you hit temperatures above 110 degrees Celsius. When that happens, that cell gets a full short circuit, it's on fire, then the neighboring battery or neighboring cell will get too hot as well, and that forms sort of this chain reaction. And that's a major problem in this industry, one where our technology solves it. We have instead of a polymer separator, which will be thermally unstable at those temperatures, we have a fully embedded ceramic separator, which is stable at high temperatures and makes it much, much less likely for you to have a safety problem. Our cells pass the most stringent safety testing, including nail penetration testing. We've done fire propagation testing in battery systems where we physically set a cell on fire in a pack and demonstrated that it doesn't propagate. On to the cycle life advantage. Here, you can see this is real data of an Electrovaya Infinity cell demonstrating over 14,000 cycles until it reaches its 80% of its initial capacity. That is a groundbreaking result for an NMC-type chemistry. And this technology is chemistry-agnostic. So it doesn't really matter what chemistry you use. Electrovaya's technology will allow that significant improvement in cycle life. Now is that important for all industries? Maybe not. If you put our battery in an electric vehicle, you'll do over 3 million miles in that electric vehicle, maybe you don't need that there. But an electric vehicle typically is doing 1 cycle a week, maybe 2 cycles a week. While if you look at a robot in a warehouse or a forklift in a warehouse, they will be often doing 2, 3 cycles in a day. So cycle life really matters for a lot of different applications, especially the heavy-duty mission-critical ones, which we're after. So in terms of addressable markets, these are large markets. Material Handling, Warehousing in general, it's very quickly growing, especially with the further prolification of e-commerce. And typical warehouses are -- the goods inside those are moved by electric vehicles, whether those are electric forklifts or electric robots, what's common is they need batteries, which last all day and can charge multiple times a day and also do not have a fire risk. So that's why that's such an important market for us and one where we're doing very well in. And now that the company has reached some level of stability and growth around that market, we are looking at the other segments, which have commonality in terms of the need for better safety and cycle life. That includes applications like Defense, certain Energy Storage applications, Mining and Construction, amongst others. Now our technology isn't brand new. It has been -- we're growing the deployments over the last 5 years. We're now powering over 200 warehouses across multiple continents, and these are operating 24 hours a day. So it's a proven technology for very heavy use applications. In terms of customers and partnerships, we probably have as blue chip a roster as you could have. We're partnered with the Toyota Material Handling Group in North America and supplying multiple brands under their organization. We're also supplying a number of brands in the Robotics and AGV segments. And in terms of who's using our products, you have extensive list. As I mentioned, over 16 Fortune 100 companies using our batteries, including some of the world's -- including the largest retailers and e-commerce companies. We're also partnered with Sumitomo Corporation out in Japan. And through them, we have started working with a number of multibillion-dollar construction OEMs -- construction vehicle OEMs and are seeding additional opportunities in the Japanese market. And so we have a number of new products, which we're also launching. So we have a new module, which is designed specifically for heavy-duty construction and mining vehicles, which was designed with one of the Japanese OEMs in mind. That's just about to ship. That's there, called 4S2P. We're also launching some -- robotic battery systems for various new robots, which are getting launched. That's that second image there. The third, it's sort of an adjacent market to Material Handling. This is ground support equipment used in airports. We're launching a product there, which will be deployed next month at a major airport. And then finally, most interesting here is our energy storage product, which is well underway in development, which we will deploy next year. We have a number of customers who already use our batteries in their warehouses, have asked us for this type of product to support the warehouses and other infrastructure these companies are building out and where they want safer, better batteries, which they've already seen operate in their warehouse facilities. So that's a product we're very excited about. We're putting significant efforts in that, and we're -- it will be a class-leading product with regards to both better safety, which is becoming more salient as an issue, especially with major fires and some large battery energy storage projects as well as the cycle life is a key advantage. Another new product, which we're pleased to discuss here is our Demand Response System. We have already deployed in a typical warehouse, maybe up to 5 megawatt hours of batteries. These use a lot of power in warehouses, and we have seen an opportunity to deploy an intelligent AI-driven Demand Response System, which we are planning to launch later this calendar year with one of our major end customers. So it's an exciting product. It gets us into virtual power plants, demand response as well as a sort of a SaaS-driven revenue generation model. So we're looking to get -- grow our recurring revenue as a company. These batteries, they last such a long time that makes our customers very happy, but we do want to find ways to grow recurring revenue. And the SaaS product is one of them. We're also looking at a combination of lease rentals, which will provide more of a subscription-based energy services product. We're looking to get about 10% of our revenue from recurring streams hopefully next year or probably more likely fiscal '27. In terms of global reach, we have our operations in Canada and the United States. We're also seeing so much activity coming out in Japan. We're planning to launch an operation there. And that will be announced when it's announced. With Jamestown, New York, this is our largest investment in terms of production capacity, in terms of capital equipment and just strategically in general. This plant will provide our Infinity products made in the U.S.A. with a supply chain, which is very domestically oriented. And if it's not domestically oriented, it is friend-shored. So we have successfully reached funding from The Export-Import Bank of the United States worth a $51 million direct loan. And we have also enabled strong incentives from the state of New York and the county. So the other -- some other key facts about this facility is; number one, it's got very low-cost electricity, less than $0.05 per kilowatt hour delivered, very important for battery manufacturing; second is it has room to expand, we have over 52 acres of land there, and we can easily expand this building as demand and capacity grows; finally, this facility will enable us to do over about $200 million in additional annual revenue in terms of our manufacturing capacity over time, and that's clearly important as the company continues to grow. So in terms of other products in R&D, we've success -- I'd say the Infinity battery technology, which is based on a ceramic separator has been very successful and will continue to be so. It fits that heavy-duty mission-critical part of the market, and we expect it to become the leading technology for that -- those market segments. We're also developing another ceramic separator. However, this one will be for a solid-state battery. That ceramic is being made in-house, and we're making that separator with a similar direction in terms of its production process. So it's scalable. We have cell cycling in the lab right now, making more and more consistent results. And this is a product we're very excited about for potentially defense applications, drones, consumer electronics -- applications, which really need very high energy density and of course, are willing to pay for better performance. I'll let John jump in on our recent financial trajectory.

Thanks, Raj. This slide essentially shows some of the major financial metrics that Raj discussed earlier. A snapshot of the last 5 quarters, showing the trend in revenue as we increase into Q2 2025, where we had just over $15 million of revenue and just over $800,000 of net profit. Obviously, the positive EBITDA that we've had over the last 8 quarters is not enough for us. We want to continue that trend, continue to grow EBITDA, to grow net profit as we push past the breakeven point, which is roughly $50 million in revenue per year. From a balance sheet perspective, you'll see over the last 12 months that we've increased our total assets and decreased our liabilities at the same time, increasing shareholder equity considerably by almost 3x in the last 12 months. So what we see is this puts us in a solid position financially to continue this growth that we've discussed to hit our targets for 2025 and to hit our targets for 2026 and beyond.

Yes. In conclusion, I'd say Electrovaya is on the right path. We're executing exactly to what we said we would do. I think during the last webinar, we said we were targeting closing our EXIM facility, refinancing our working capital debt and reaching profitability in the near term. We've done all 3 of those things. The working capital was replaced in tandem with closing the EXIM deal, that working capital facilities with Bank of Montreal, which is a very strong bank for both sides of the border. And we're very pleased to see that $15 million generating already $2 million in EBITDA and over $800,000 in net profits in the last quarter. As we continue to grow our revenue, those metrics will continue to improve. And we see ourselves becoming that leading heavy-duty mission-critical battery technology for a growing number of segments. And with that, Glen, we'd be happy to take some questions.

Super. Thanks, Raj. We do have quite a few questions in the queue already. And to our audience, if you do have a question, please use the question text box within the portal. So the first question, Raj, is maybe a little bit of history of the company. You were founded in the '90s, maybe the evolution of the technology when you first became commercial and any sort of critical milestones?

Yes. So the -- as I started out saying, the battery industry is very competitive, but Electrovaya has been a leading member of this industry from its early days. And if you look at the North American battery space, at least, most of the early players came in and died. Electrovaya has survived that entire span of time. When I joined the company in 2009, our focus was Automotive, and we were supplying Chrysler at the time; and later, even Mercedes-Benz through their smart car. However, that space itself is supplying in the Automotive industry is intensely competitive and intensely focused on continuous cost reductions as the main objective. So we may have had a cell, especially around 2015, 2016, which was significantly superior to our competition for the Automotive space, but Automotive was really focused on dollars per kilowatt hour. And that is a -- when you're getting driven into commodification, that's where it's very difficult to compete against larger Asian players. And so around 2017-2018, 2018 is when we pivoted this company around this ceramic separator technology, which enabled better safety and cycle life. And that's today become the Infinity battery technology. So -- and it's got a long way to go. I think we're just getting started. Batteries, it takes time to get qualified, takes time to get customers comfortable with the technology. That's just generally how it goes. I think we're in the early stages of the adoption of our Infinity technology even 6, 7 years after we developed it.

Super. I guess talking to the Infinity technology, are there any other competing technologies deliver the same safety, longevity results as your proprietary ceramic separator?

There's nothing really quite like it in the market. The -- in terms of what we're providing is safety, cycle life with energy density and performance similar to the best of the industry. There are much lower energy density technologies available like lithium-titanate based technologies, which also provide very good safety and very good cycle life, but are substantially more expensive and much lower energy density when compared to our Infinity technology. So I think we're in a class of our own for what we do, and I think it's getting recognized now.

Super. And I guess on the same topic, how and where do aerogels perhaps come into play as a competitive threat? For instance, Aspen Aerogel cells into the EV battery users GM, et cetera, to prevent thermal runaway?

So our technology is about starting thermal runaway fundamentally in the cell, right? And that's from the ceramic separator technology, and we've demonstrated that very, very clearly. So when you make a battery system using an Electrovaya cell, you don't need to use aerogels or anything around the packs to make it safer. There are other ways, of course, of mitigating fire propagation, including that. I'm not here to say one is better than the other. I wouldn't say it's even a competition in that sense. We are not targeting the Automotive space because of the margins available in that space compared to mission-critical heavy-duty applications. So I'd say we're in a -- again, focused on other things.

Okay. Perfect. A good segue into the next question. How are you prioritizing your TAM within the various target verticals, example, defense, energy storage, et cetera, to capture the largest market share? And what is your time line amongst the targets? Are you entering any new verticals in later this year or in 2026?

So the TAM on our core Material Handling market is very large. And the adoption is still at the beginning. I'd say we're at maybe 10% of new vehicles are being outfitted with our batteries. There's obviously significant room to grow. What we're also seeing is OEMs like Toyota are rapidly transitioning to electrified vehicles from their mainstay, which used to be Internal Combustion. Toyota Material Handling, just for those who don't know, are building a new plant in Indiana. They're spending hundreds of millions of dollars, and that is to increase capacity for electric forklift production. So we see the TAM for the core Material Handling market is large and growing. In terms of Robotics, this is again a segment which is rapidly growing as more and more automation takes place around the world, whether that's moving goods in warehouses, monitoring stores or even cleaning your streets and buildings. Everything needs -- that's robot -- is powered by needs batteries if it's powered -- if it's using a robot. So that's another segment we're very excited about. Defense, we have our batteries in a number of defense applications already. It takes time for these applications to scale up. But the reasons companies want to use our batteries is because of the safety, the performance and the domestic supply chains, which we're developing. So that's, again, another key market. The one segment which we were not targeting earlier, which we are now -- and I mentioned in our presentation, is the Energy Storage segment. And that was a segment where commoditized Asian battery systems were prevalent in, especially in these grid scale storage systems. However, we see an opportunity as companies and end customers become more aware of the safety hazards with lithium-ion batteries, especially batteries which are near or being co-located with expensive distribution centers or other types of infrastructure, including data centers, we see a demand from our customers for our Energy Storage products for those types of applications. So that's another new vertical that we're going after. We also have orders in hand also from OEMs in the Construction Vehicle segment. And so there's a wider array of verticals being targeted, which I expect to start generating meaningful revenue in fiscal 2026.

Okay. Super. Do you currently source your lithium in the U.S. or elsewhere? And maybe to expand on that question, talk a little bit about your overall supply chain?

We don't get involved in the actual chemical procurement. We would procure our cathode and anode materials from large corporations, and these are typically located in countries like Korea. And so those companies would be in charge of the raw material procurements.

Okay. And then I guess on the same topic in terms of raw material and lithium, I mean, the price jumped around quite a bit over the last couple of years. Can you just discuss the current -- how the current price of lithium impacts your business and how you see that moving forward? And in general, sort of the lithium supply price chain?

Again, Electrovaya's battery products are not commoditized. So movements in commodities do not really affect our margins nor our sales price.

Okay. Have you begun using the Jamestown facility? And what is the typical project this facility used for versus manufacturing capacity outside of the facility? Is it larger scale projects or specific areas?

We already have a team in Jamestown. We're already utilizing the facility for some of the assembly processes of our battery systems. So we may produce a certain portion in our Mississauga facility and a certain portion in our Jamestown facility. So we're getting the team up to speed on how to make battery systems. And of course, we're growing the team and getting talented individuals located in Jamestown and in preparation for the big start of production, which is the Cell and Module production, which starts around this time next year.

Okay. I think you touched on this during the Demand Response portion of your presentation. But I guess the question is, can you talk about your ability to monetize the cycle life advantage?

So the cycle life advantage, we are already monetizing it to some degree. So for instance, with Toyota Material Handling, most of their sales on forklifts and with the power as well were leases, right? So they would lease the forklift and lease the battery to an end customer. And when they would lease a lithium-ion battery, typically, the residual value of that lithium-ion battery after 5 years was very, very low. And as a result, leasing the lithium-ion battery typically did not make sense for the customer. What we developed in partnership with Toyota was taking a look at the cycle life results, not just at the cell level and pack level, but also looking at data from the last 5 years of deployments. And with that, we were able to increase that residual value on the battery significantly, making the lease very competitive and driving a lot of new business our way, which we've -- and this was just launched late in 2024, November 2024. And so it's already -- we've already seen the impacts of that with a lot of new smaller-sized orders, which are being driven through this program. So that's one way of leveraging the cycle life advantage. The other is in terms of Energy-as-a-Service, we're starting to see opportunities to scale that where an end customer will want to take a battery, but pay for it as they use it. And because the cycle life is so good, the returns on -- for Electrovaya over time are substantial, especially if this battery system is a 10-plus year asset, you're looking at really astounding results, again, taking advantage of that performance. So there are various ways we're already monetizing it and looking to monetize it more so over time.

Okay. Thank you. A question related to today's press release for $6 million of new orders. Was the order received today for replacement of other battery types?

It was a combination of new sites and replacement of other battery types.

Thank you. Does the IP around safety for Infinity apply to the solid-state product with no fires? And maybe just touch on your solid-state R&D work.

Well, a solid-state battery is a lot more energy in a smaller space. So at this point, it's hard to say whether it's going to have similar safety results as the Infinity battery technology. However, it's our priority to make it as safe as we can, which is why the ceramic separator is so important with the lithium metal anode. We're making progress there. It's slow but steady. About 1.5 years ago or nearly 2 years ago, we changed directions with our solid-state battery efforts, and that direction changes is showing results right now. We will -- we're making small pouch cells about 1 amp-hour, getting more and more consistent results. And as we engineer our battery design, we're getting more and more confident that this is a commercializable product.

Okay. Raj, how cost competitive for the power storage market is the product on a total cost basis? One would think that large-scale utilities and hyperscalers would consider that plus the anti-thermal runway feature would make this a layup for large-scale storage facilities?

We think so. I think there's a life -- there's clearly a life cycle advantage stemming from our cycle life advantage. And then that safety element is, I'd say, a key driver from some of the interest we're seeing today, which is why we've put this product on the fast track in development. And we already see significant customer interest for it. So we will have it to market next year, and we'll have our first deployments early next year.

Can you please speak to the Battery Management System? How much is battery chemistry or performance and how much battery management?

The fundamental Infinity battery technology is a chemistry technology. It stems from the ceramic separator, a unique electrolyte and cell design. That's fundamentally the backbone of our technology. We have a large team on making Battery Management Systems. We have -- we're on our fifth-generation Battery Management System. It's core as well to the battery system products that we produce, and it's a great piece of technology, but they're somewhat independent of one another. And the Battery Management System's main job is to interface with the vehicles or end user device and also ensure the battery is operating in its -- within its safe operating window.

Okay. How does your battery -- or how do battery prices compare to a competitor like Plug Power that produces hydrogen fuel cells for warehouses? Do you have enough pricing power if lithium prices were to rebound?

I think our technology offers the current end users, which also consider hydrogen in their warehouses. I think we're very competitive. And they obviously like our product. Otherwise, they wouldn't keep ordering it. So I'm not too familiar with Plug Power's pricing, so I can't really comment further.

Does Electrovaya see potential market with robotaxis that are working 16 hours a day?

For sure. A robotaxi is like one of these robots or forklifts in the warehouse. So that's a change in Automotive. I have electric -- I have 2 electric cars and they sit parked 23 hours a day. A robotaxi on the other hand, needs a battery, which can keep up with multiple cycles in a day. And there is a potential opportunity in that type of segment.

Can you speak to the current interest rate environment and how that may impact the business' ability to expand over the next 2 years if rates remain elevated? Please touch on the refinance risk over the next few years as well as and how that will impact margins?

Well, our interest rates have come down substantially. And the biggest change was moving from a small private lender to Bank of Montreal. We saw -- John, correct me if I'm wrong, but close to about a 5% -- 500 basis points reduction in our interest rate right off the bat there. And then we also secured this facility with EXIM, Export-Import Bank of the U.S. That is also below market rates, significantly below market rates. So I'd say we're somewhat -- we see this as a significant improvement in our cost of capital.

Yes. I'll just add to that, that we have some flexibility with where we actually hold our working capital cash as well. So we can hold it denominated in U.S. or Canadian. So we can pick and choose the interest rate that we want. We can lock some in for a longer period for a 30-day period to reduce the interest rate impact as well.

And some more questions related to pricing and I guess, variables around pricing. How are you being affected by raw material costs? And how are you trying to mitigate any impact of price increases?

So raw material prices fluctuate all the time, some go up, some go down. What we found is, again, our product is heavily engineered, heavily -- it's not a commoditized battery. And as a result, those movements in commodities really have not a significant influence on our margins or our sale price. And as we increase our capacity, as we increase our production, we're seeing more power in our buying power, and we expect overall margins to remain robust and grow as time goes on.

And one more question on this topic. Can you clarify the response on the lithium price? Are you saying that if lithium prices rise, you could just pass that on to the end customer?

Lithium price movements have very little bearing on the overall cost or sale price of our units.

Okay. If you don't win bids, can you talk about why? Is cost ever involved?

We're quite happy to lose bids if it comes down to cost. We have a very robust pipeline of orders already and a growing -- and that's growing every week. So if someone wants to buy a cheaper battery, they're most welcome to.

How far down in the manufacturing process does Electrovaya go? Are you buying cells from Korean suppliers and then fabricating those cells into batteries? It sounds like they are primarily supplying the separator.

We manufacture the cell. Now we -- this is a very complicated process where we buy materials and from many different suppliers. But fundamentally, it's an Electrovaya cell, and it is -- so that's the core building block and then we make battery systems out of that cell. The Jamestown facility will assemble that same lithium-ion battery cell, but using more and more domestic supply chains on the input materials.

Can you talk about the core strengths of your IP portfolio? And who are the closest competitors with other materials?

So IP, of course, is very important to us. There's 2 aspects of IP. There's the patents themselves and then there's the know-how. And in terms of patents, we have about 100 patents thereabouts. We've continued to file new patents. There are currently 4 or 5 new patent applications under review, whether that's -- and most of those new patents are currently around solid-state batteries. But we have about 30 patents around lithium-ion battery ceramic separators. But going to the know-how portion, that's really where most of our IP really sits because if you patent things too much, people see -- your competitors see the products more and more over there. And so a lot of the protection is really in how you manufacture using ceramic separators or how you assemble these lithium-ion batteries rather than physically what it looks like.

Okay. Can you comment on your view of longer-term gross margins when you take into account capacity utilization ticking up?

Yes. We expect -- the gross margins have been very steady around that -- around just over 30%. They will -- we expect them to slowly creep up, and we're targeting around that 40% number. But more important, now that we're generating strong EBITDA, I would focus on the EBITDA percentage as time goes on and of course, net profits.

Okay. How are you approaching global demand and expansion outside of Japan and North America? Will you seek to enter other markets that may present opportunities?

We'll be opportunistic, but we don't want to get ahead of our skis either. So we're -- Electrovaya has had a conservative approach to our business, and that has panned out well for us. So for instance, the Jamestown facility, there was a lot of pressure on us to upsize that facility from day 1. And I think we made a conscious decision, which was the correct one, upsizing it to what we could fill up in terms of demand very, very quickly and then scale it as time goes on. The same thing is for other geographical markets. We are looking at Europe. We're looking, of course, at Japan, and we'll play things slowly. We want to see that demand being very clearly there before we make those types of decisions and investments.

Okay. Super. I guess this question really delves into the whole lithium-ion recycling conversation and specific to your batteries. Do you get involved in that at all? Or I guess, are any of your customer batteries coming to the end of life and they have to do something with them?

So these probably -- the Infinity battery systems were launched in essentially 2018. Not one of them has been recycled for reaching end of life. The only recycling that we really do is if batteries are involved in a physical accident or they don't meet our quality standards. And then when that happens, we have relationships with recyclers. But our technology is such a long-lasting battery. The recycling component is much less significant than typical lithium-ion batteries.

Since your batteries are in vehicles, do companies need to cease or shift operations to provide VPP grid services?

We have not seen that yet.

Okay. Again, to our audience, if you have a question, please use the question text box. We've got a few questions remaining. Are any of the recent announcements of new battery technologies coming from the Chinese or GMLG of any concern to your future business? If not, why not? And will your solid-state battery keep tech ahead if successful?

So Electrovaya is focused on what we're good at, and that's being a platform technology. So chemistries evolve and will continue to evolve. So cathode anode chemistries will improve over time, and we want to be in a position to leverage those improvements as they come. But what's different about us is we make those chemistries into a safer, longer-lasting battery. And that is what we will continue to focus on. The same is true for our solid-state battery. The focus there is on the electrolyte and separator just as it is on the Infinity battery, as cathode materials become more energy dense or higher or lower cost, we can leverage those improvements.

Okay. As you think about potential U.S. expansion, are you looking at Jamestown or other locations?

If we're to expand our U.S. production beyond this first phase, it would be in Jamestown because we have the 52 acres, we would just make the building larger.

Okay. Which module type will the energy storage offering use? And how many megawatt options?

It's a specific module design that we've -- we're working on. And in terms of the block size, it will be 20-foot containers, and these can be scaled as necessary.

What is the warranty program you offer? Have you typically reserved for warranty expense and have claims been at all meaningful or beyond estimates at any point? How old is your oldest battery in the field?

I'll start that, and John might conclude. But oldest battery in the field is now 7 years old, I think, around that. And it's outlasted the vehicle it was installed in and it's on its next forklift. So it's -- and in terms of performance, it's lost less than 5% of its battery capacity over that period. So it's demonstrating that result. In terms of warranty claims, they've been very light, and we've probably over -- we've probably allocated more than we needed to for that. John may?

Yes. That's exactly it. We do provide for warranty. It's just good accounting practice. But historically, we've not seen any significant claims or anything outside of the ordinary.

How is Electrovaya going to benefit from 45X and other U.S. tax incentives? What is the potential margin uplift to battery systems producing in Jamestown when incorporating these type of incentives?

Well, we've been watching the new bill go through in the United States. It's not 100% clear what's going to happen with 45X. But from the initial bill which passed in Congress, 45X is remaining, which is a good sign and a good thing for Electrovaya. The restrictions on 45X seem to be against supply chains relying on China, which we're not. So we believe that, that production tax credit will benefit production coming out of Jamestown. By how much? It's hard to say, but it could be about a fairly substantial benefit to us.

Perfect. We have reached the end of all questions, Raj, John, so maybe some closing remarks by you, and then we'll end the presentation.

Well, Glen, it was a pleasure. Great questions as usual. And we're -- John and I are very pleased to see what's happening with the business as we continue to track according to what we laid out and are looking forward to a number of major further advancements next year, namely most important of which is the start of production in Jamestown. And then, of course, continuing the trajectory with regards to improving profitability and revenue as we -- as time goes on.

Super. Really appreciate it, Raj, John. And then to our audience, thank you very much for joining. This concludes this presentation.

Thank you so much. Bye.

Thank you.