Earnings Call: Q3 2021

Aug 10, 2021

Earnings release

Hello, and welcome to ElectroBias Q3 Fiscal twenty twenty one Financial Results Analyst Conference Call and Webcast. At this time, all participants are in a listen only mode. (877) 407-8291 to participate in the Q and A session. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Executive Vice President and CFO, Richard Halka. Please go ahead, sir. Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's conference call to discuss ElectroVaya's Q3 fiscal year twenty twenty one third quarter financial results. Today's call is being hosted by Doctor. Shankar Dasgupta, CEO of Electrovaya myself, Richard Halka, Executive Vice President and CFO and will be joined in the question period by Doctor. Raj Dasgupta, Chief Operating Officer of Electrovaya. On 08/09/2021, Electrovaya issued a press release concerning its business highlights and financial results for the third and nine month period ended 06/30/2021. 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 SEDAR website at www.sedar.com. 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 trends in our market, including their size and potential for growth and our competitive position in our target markets. Although we believe those expectations reflected in such forward looking statements are reasonable, such statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied in such statements. 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 fiscal twenty twenty one third quarter results and the most recent Annual Information Form and management Discussion and Analysis under Risks and Uncertainties, as well as in other public documents filed with the Canadian Securities Regulatory Authorities. Also, please note that all the numbers discussed on this call are in U. S. Dollars unless otherwise noted. And now, I'd like to turn the call over to Doctor. Shankar Dasgupta. Shankar? Thank you, Richard, and good morning, everyone. I would like to start this morning by taking a minute to review Electrovaya's Q3 financial progress and Richard will go over it in details later on. Our balance sheet strengthened quite nicely with current assets going down, liabilities current assets going up, liabilities going down and equity deficiency was reduced. Revenue was $1,900,000 There is some quarter to quarter changes happening there. Gross margin is in the 30s. And most importantly for us is that the strategic supply agreement, which we signed in December 2020 with the largest OEM, with Raymond Corp, which is a premium electric brand for Toyota, is now started gaining momentum with early adopters and the Fortune 500 folks. The if you look back, why is folks like in these major corporations teaming up with Electrovaya? The differentiation is Electrovaya's unique technology. So Electrovaya's unique technology gives very high safety in the cells, modules and batteries, very high longevity and cycle life and we have a strong IP covering large number of our products and processes and systems. The other initiative we did in Q3 FY twenty twenty one was starting the Electrovaya Labs. This was a new division and it's a research focus for the next generation batteries. The next generation batteries, which we are been working on, are some very exciting products. We started our chemistry experimental work at the Sheridan Research Facility and the work is continuing on solid state cells. We have filed an interesting patent there and we are making coin cells fabricated with lithium metal anodes and interesting results coming out. There is some novel electrode processing technology also being developed. So again, the Electroviral Lab has been an important area. We are also going after the emerging markets, whether it's the electric materials handling vehicles, electric buses, electric trucks. And the climate change mitigation, the battery is the enabling technology. And yesterday's UN report was quite horrific and suggests that we should all move in quickly. So going back to the channels to the market, last quarter, we are making good progress in direct sales. And so and we have picked up couple of orders from there and we can see the progress happening on the direct sales side. On the channels, on the OEM strategic sales side, we of course have been working with Raymond Corp. They signed the agreement in December 2020 and we are gathering momentum for early adopters, they have a return on investment calculator on their website and it really shows very, very rapid returns in a matter of months for a user. So we will see so we are seeing the momentum happening. So Raymond's focus market is of course USA and Canada, though through its distribution chain, we are seeing orders being placed from Latin America and elsewhere. So the seeding is happening. We are operating in about over 50 sites in North America and we are seeing some early demands coming from Argentina and elsewhere. We are those who can see the slides would see that we are seeding with lot of new early adopters and these early adopters are now in about 50 over 50 sites and some are fairly large and massive companies. Some are probably the world's largest company public wise, some are probably some of the largest companies in this private sector. So we are really pleased that this emerging market, which is a multibillion dollar market and a very conservative market, if I may say so, is started moving and Electrovaya along with its partner Toyota and Raymond seems to be leading the charge. I will now turn the call over to Richard to review our fiscal third quarter results in greater details. Thank you, Shankar. Revenue for Q3 fiscal year twenty twenty one was 1,900,000 compared to $4,800,000 for Q3 fiscal year twenty twenty. Revenue for year to date fiscal year twenty twenty one third quarter was $7,400,000 compared to $7,600,000 for the year to date, the nine months ended 06/30/2020. Gross margin for the fiscal third quarter was 37% and in the prior year fiscal quarter '30 '3 percent for year to date fiscal year twenty twenty one compared to 3537% for Q3 fiscal year twenty twenty and year to date fiscal twenty twenty, respectively. Our objective is to maintain the gross margin in the 30% to 35% range. Our margins vary with a number of factors, including product mix, special customer pricing, material costs, shipping costs, foreign exchange movement. In the current fiscal year, there has been an increase in the price of some components, most significantly the cost of steel, which impacts the cost of the battery enclosures. Management believes that the year over year decline in revenue was primarily due to a reduced order volume resulting from a transition in the OEM strategic supply agreement, which was designed December 2020. As the Dreamit brought a new corporate sales team focused on large corporations and management believes the sales cycle is relatively long for this emerging technology. Continued disruptions to the supply chain caused by the COVID nineteen pandemic as well caused some component shortages, which also impacted the company's sales. It appears that the delays have been resolved as the company received a number of significant purchase orders late in Q3 twenty twenty one and early into the fourth quarter of fiscal year twenty twenty one, as noted in the business highlights above. The majority of the new orders were generated through the OEM sales chain, but the company also received a significant new order through its direct sales channel. Orders were received from both new and repeat customers. The company's financial position improved in as at 06/30/2021, as compared to 06/30/2020. Current assets increased by 40%, while current liabilities were reduced by 12% and the equity efficiency was reduced by 61%. The company ended the period with $885,000 of cash, had drawn 2,800,000 of a maximum available working capital facility of $5,600,000 leaving a further $2,800,000 available for drawing. The company believes this available liquidity of $3,700,000 which is $900,000 of cash plus 2,800,000 in available line, along with the collection of $2,500,000 of accounts receivable and conversion of $4,900,000 of inventory into saleable finished goods is adequate working capital to support its operating activities for the next twelve months. I would now like to turn the call back to Shankar to wrap up. Thank you, Richard. In conclusion, we have exceptional battery performance. And as our OEM partner shows, the return on investment is very, very high. So it's we believe this is a game changer happening with industry leading cycle life and safety with excellent energy and power. And we are seeing that early adopters moving towards us. We've also started the Electrovaya Labs, which starts commercializing lot of pent up technology, which is sitting inside Electrovire, including the next generation solid state cells and some unique electrode processing technology. On the marketing side, as we had mentioned earlier, the in the materials handling sector alone, we are now over 50 locations, probably hitting nearly 60 by now. And this is a very large market. If you with an addressable 1,000,000 to 2,000,000 electric vehicles in this materials handling space, it's a conservative market and we are seeing early adopters moving into the space and moving into Electrovire and its partners. We are also looking at the emerging markets, the electric bus market, the electric truck markets and the automated guided vehicles market. We believe 2022 and 2023 will be the growth areas for the electric buses and the electric trucks. The whole sector may accelerate with the new climate change mitigation approaches, which the governments have are being encouraged to take and we look forward to that. And finally, on The U. S. Listing, it is an ongoing process and of course the Board and others are reviewing this. So at this time, this concludes our remarks this morning. Richard, Raj and myself would now be pleased to hold a question and answer session. Those asking the questions and Kevin might be able to help us is we'll need to phone in to ask the question. Just to reiterate, the number to phone in is 877407 Our first question today is coming from Gianluca Tucci from Torrent Capital. Your line is now live. Hi, good morning guys. It seems like the visibility on the Raymond side has cleared up according to the remarks. Can you kind of talk about that or dive a bit deeper? What's changed today from a few months ago? And what gives you that confidence in the visibility in that channel's growth? I think good morning, by the way, Juluca. I think that there's a number of factors at play here. It's just not one thing. First of all, I think that the entire Raymond organization, the sales side of it, needed time to really get up to speed, market to their Fortune 500 customer base and really understand the product. And the sales cycle with those end customers tends to be longer. But what we found now is we're getting a lot of what we would call seating orders, and now we're starting to get repeat orders as well. So, we feel that that sort of piece has moved on. I think another thing that entered into it, there were some, didn't affect us quite so much, but there was some supply chain issues in terms of specific components, everyone knows about the chip market. And I think that can affect the ordering cycle and the manufacturing cycle for companies like Raymond and our delivery cycle. So I think those things seem to have cleared up now and are hopefully behind us. But I'll also move it over to Raj, who is much better positioned to answer. I think some of the there's some great progress made over the last several months in, as Richard mentioned, in some of these, what we call, seeding customers where they are buying relatively low numbers of units, but these are customers who have serious large potential. And then of course, we did announce a few weeks ago that there was some significant relatively significant sales driven through the OEM channel, which and those particular customers are very significant. Okay. And I guess can you kind of back into in the press release it was talked about that some significant advances in the e bus vertical has been made. Can you talk about like what that exactly entails? And how do you envision that kind of rollout? Does that mean that there's partnerships in the hopper? Or how should like we be thinking about the company's pursuit in the e bus vertical? I think there's not too much we can add to this except what we had said in our releases in MD and A, which is that when we issued our first battery, it generated a lot of interest in the market when we launched that. We have had very active discussions with a number of parties. We are not at a point where we can add much more than that, but we are very positive about this sector, particularly moving into 2022 and 2023 as Shankar has pointed out. Raj? Yes. And we do have this product of ours was in development for some time. We do have prototypes operating in the field. And as Richard mentioned, the response from the OEM side has been pretty strong and we're in discussions with a few vendors there. And timing wise, it will be 2022 and 2023 and lot driven by both President Biden's budget for I think he's about $20 odd billion and Premier Prime Minister Trudeau is $2,500,000,000 for supporting electrification, so as those budgets pass back, so we can see. Okay, that's good color. Thank you. And then just lastly, can you give us an update on the status of the NASDAQ listing and how that initiative stands today? Yes. As we mentioned in the press release, our Board and management team are looking at the capital markets and we have to assess the risks and benefits for our shareholders of that. And at this point, there has been no decision made to move ahead with our plans. We are, of course, keeping all our options open very actively, but no decision has been made at this time. And we're very, very carefully watching the capital market situation. We want to do something that's the right thing for our shareholders. We want an accretive transaction here, not something that is going to work to their detriment. So we're very, very focused on that. Okay. Thanks guys. That's all. Thank you. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. That concludes our call. Thank you again for listening in this morning. We look forward to speaking with you again after we report our annual numbers for fiscal year '20 '20 '1. In the meantime, we wish you all good health. Thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.