Earnings Call: Q4 2020

Dec 1, 2020

Earnings release

Greetings, and welcome to the Electrovaya Quarter four and Year End twenty twenty Financial Results and Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Executive Vice President and CFO, Richard Hoffman. Thank you. You may begin. Thank you, operator. Good morning, everyone, and thank you for joining us on today's conference call to discuss Electrovaya's fiscal twenty twenty fourth quarter and year end financial results. Today's call is being hosted by Doctor. Shankar Das Gupta, CEO of Electrovaya and myself, Richard Halka, Executive Vice President and CFO. On 11/30/2020, Electrovaya issued a press release concerning its business highlights and financial results for the three and twelve month period ended 09/30/2020. If you would like a copy of the release, you can access it on our website. If you want to view our financial statements, management discussion and analysis and annual information form, you can access those documents on the SEDAR website at www.sedar.com. As with previous calls, our comments today are subject to normal provisions relating to forward looking information. We'll provide information relating to our current views regarding trends in our markets, including their size and potential for growth, our competitive position and our target markets. Although we believe that the expectations reflected in such forward looking statements are reasonable, such statements involve risks and uncertainties, and actual results may differ 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 implied in making forward looking statements may be found in the company's press release announcing the fiscal twenty twenty second quarter results and the most recent annual information form and management discussion and analysis under risks and uncertainties, as well as in other public disclosure documents filed with Canadian securities regulatory authorities. Also, please note that all numbers discussed on this call are in U. S. Dollars unless otherwise noted. Also note that we use the term EBITDA. EBITDA does not have a standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other users. We believe that certain investors and analysts use EBITDA to measure performance of the business. EBITDA is defined as loss from operations plus finance costs plus stock based compensation and depreciation. And now I'd like to turn the call over to Shankar. Thank you, Richard, and good morning, everyone. This year, fiscal twenty twenty, has been a transformative year for Electrovaya. Electrovaya ended the fiscal year with a total revenue of $14,500,000 or $19,000,000 in Canadian dollars, tripling our revenue year over year. Our revenue for the quarter ended thirty September twenty twenty was C6.9 million dollars or C9.1 million dollars the highest quarterly revenue in our recent history and an excellent 44% sequential growth over the preceding third quarter ending thirty June twenty twenty, which itself was 146% sequential increase in revenue growth from Q2, the March in this fiscal year. Our EBITDA in Q4 is again positive. It grew by 60% to CAD 800,000 or over CAD 1,000,000 following a positive EBITDA of $500,000 in Q3. An important milestone in September 2020 was the final settlement of our 15,000,000 of convertible debt, which we repaid. Richard will discuss the financial results in more details. We are now powering electric trucks in about 40 locations, mainly in The USA and to large companies. We are marketing through two channels, through our OEM partners distribution as well as direct sales. How big is our addressable market in lift trucks? We understand that there are over 2,000,000 lift trucks operating in North America, moving goods inside warehouses and factories, providing essential services in transporting groceries vital to e commerce and many other applications. If the addressable market for intensive used lift trucks is, for example, 25% of the total, that would be about 500,000 lift trucks. And if we take each battery to have an average price of $200,000 then the addressable market for battery is in the order of magnitude of $10,000,000,000 in North America alone, a large potential market. During COVID, Electrovaya is an essential company and our very dedicated and courageous team comes to the factory every day carrying out vital production, operation, engineering, research and admin stars. We all admire our team's courage and dedication and their attention to details in complying to the COVID-nineteen guidelines. They are keeping the groceries and many vital goods moving in warehouses, cold storages and in e commerce distribution. Our OEM sales partner is possibly one of the world's largest companies and has access to all technology across the world. And we are humbled that we chose Electrovaya and now quite quickly we are powering electric lift trucks and forklifts in 40 locations. Most of our clients have multiple locations, tens or hundreds of them, hence being able to see our technology in these 40 locations has been important. We are now seeing repeat orders from a number of our Fortune 500 customers. We believe we must be providing exceptional technology in terms of battery longevity, safety, energy, power and fast charging. The market this market for heavy users needed a remarkable battery, which we are delivering. Similar performance are needed for intensive use applications such as electric buses, electric trucks and electric track fees. All intensive users need the superior battery. Our lift truck battery in many locations are operating twenty four hours a day, seven days a week. I'm now going to hand the call over to Raj Das Gupta, our VP of Technology and Business Development, to comment on research and development efforts in addition to our sales and marketing activities. Raj? Thank you, Shankar. Fiscal year twenty twenty was a year of significant advances for Electrovaya with respect to R and D. Earlier in the year, we acquired 30 patents on ceramic composite separators and lithium ion batteries. We continue filing patents for new inventions in electrode cells and systems and we believe we have a substantial intellectual property in this lithium ion battery sector in general. We have been adding research and engineering staff throughout the year, including those with PhDs and other advanced degrees with a general push to increase our R and D activities. Recently, we announced our UL25AD listing. The UL certification was a major milestone as it not only underscored the significant advantage we have with respect to NMC lithium ion battery technology, but also the overall systems design, including the battery management system and the electromechanical design of our battery systems. As part of the UL certification, there was extensive destructive testing, including testing of our batteries resistance to fire propagation, where we particularly excelled. Furthermore, our proprietary subcomponents, including our cell and our battery management system, also now meet UL recognition for UL 2,580, UL nine ninety one and UL nineteen ninety eight, respectively. We believe that the large investment for these certifications will attract further growth for our battery system sales, while also providing the market a clear indication for Electrovaya's technology strength. Safety is becoming a more topical subject of late as two major automakers recently announced over 120,000 vehicle recalls due to battery safety incidents. Fiscal year '20 '20 also represented some significant advances for Electrovie with respect to our development of our next generation of high voltage battery systems, which are targeted at the electric bus and electric truck market and has been supported by Sustainable Development Technologies Canada. Due to our inherent advantages with respect to energy density, cycle life and safety, we are well positioned to take a leadership position in this nascent but high profile market. These commercial markets share much in common with the material handling market, where total cost of ownership is at the heart of procurement decisions. This is where Electrovaya excels, providing the customers with the lowest overall cost of ownership. These sophisticated buyers are interested in the long term savings that Electrovaya solutions provide. We expect to launch our electric bus and electric truck systems in fiscal year twenty twenty one. With regards to our sales and marketing activities, we had some significant challenges due to COVID-nineteen. However, despite restrictions to our ability to attend trade shows and travel in general, we continue to see new projects through our close OEM distribution relationship as well as directly to our existing and prospective customers. We expect both our OEM sales channel and direct sales channel to expand in fiscal year twenty twenty one. Currently, we are in the midst of adding new sales staff to our team in The United States and Canada as we plan to capitalize on the leadership position we have in the material handling market today. I will now turn the call over to Richard to review our fiscal fourth quarter and full year results in general detail. Richard? Thank you, Raj. It's been a very eventful quarter. We've taken significant steps to improve the company's liquidity and financial performance. For example, we negotiated the settlement of the CAD 15,000,000 convertible debentures, resulting in a gain on settlement of $5,200,000 or in CAD 6,800,000.0. The settlement conserved cash of approximately US7.9 million dollars or $10,000,000 We amended the working capital facility, increased the facility limit, extended the maturity date and also raised new funds under a promissory note. We are pleased with the continued support we have received from our lender, a Canadian financial institution. This highlights the strength of Electrovaya's products and customer base. We generated strong revenue growth, continuing our trend through 2020 of double to triple quarterly sequential growth. Revenue for Q4 fiscal twenty twenty was C6.9 million dollars C9.1 million dollars compared to C0.5 million dollars or CAD700000 in the fiscal fourth quarter September '20, '20 '19. Revenue for Q4 twenty twenty increased by 44% on a sequential basis compared to CAD4.8 million or CAD 6,300,000.0 in the fiscal third quarter ending 06/30/2020. The strong sequential growth reflects robust customer demand and scaling up of production. Revenue for the full fiscal year was $14,500,000 or CAD 19,000,000, a nearly threefold increase from the revenue of CAD 4,900,000.0 or CAD 6,400,000.0 for the twelve months ended September 3039. The company generated a positive EBITDA of CAD 800,000 or CAD 1,100,000.0 for Q4 fiscal year twenty twenty compared to negative CAD 900,000 or CAD 1,200,000.0 in the fourth quarter of fiscal twenty nineteen. EBITDA for Q4 fiscal year twenty twenty increased 68% on a sequential basis compared to CAD 500,000 or CAD 700,000 in Q3 twenty twenty. Net profit was CAD 1,100,000.0, CAD 1 point 4 million for fiscal year twenty twenty compared to a net loss of CAD 2,800,000.0 in CAD 3,700,000.0 for fiscal twenty nineteen. In summary, we strengthened our balance sheet, improved our liquidity, grew our revenue, maintained our margins and controlled our costs. I'd like to pass the call now back to Shankar. Thank you. Thanks, Richard. So in conclusion, fiscal year twenty twenty has been transformative for Electrovire. Summarizing, Electrovaya has been open and operating during all of this difficult COVID-nineteen period and thanks to our dedicated staff. Our customers are in e commerce, warehousing and distribution. Their demand for high performance lithium ion batteries is increasing. It is a mission critical application for them. We have grown quickly to 40 locations, mostly in The USA and some in Canada. We are seeing repeat sales. We are marketing through two channels, the OEM channel and direct sales channel. Our distribution agreement in mid-twenty nineteen was with the Raymond Corporation. Raymond is a 100% subsidiary of Toyota and the electric brand for their lift trucks. It is the largest OEM, I believe, in this field and has significantly increased the distribution and reach of electrified products. Our addressable market in this sector is large, several billions. We are also selling through direct channel to many customers. We are compatible with most trucks. We received the UL 02/1980 listing and believe we are the only lithium ion high energy density NMC chemistry in the lift cup industry with this listing, an important safety milestone. We are in exponential growth phase, as Richard mentioned. Sequentially, we have increased revenue by 44% over Q3. Our positive EBITDA increased by nearly 70% in Q4 over Q3. We keep increasing in an appropriate manner our research, engineering and operations stuff. Our debt has been significantly reduced in fiscal twenty twenty as the balance sheet improved. We have repaid two term loans equaling $10,000,000 as well as repaid the $15,000,000 convertible debt, a total of CAD 25,000,000 we paid this year, while we have added debt of about $7,000,000 as promissory notes. And overall reduction in term debt of over 70%. Our operating working capital revolver has increased from CAD 1,500,000.0 to CAD 7,000,000, allowing us to meet increasing product demand. Our exceptional technology of long cycle life or longevity, safety, energy and power is applicable to many other mission critical applications such as automated guided vehicles, electric buses, electric trucks and electric cars, especially the hardworking electric taxis. We have delivered over 1,000 batteries for about over 1,008 gigabytes, mostly being used in the Northeast at places like Boston and Washington, D. C. We'll be launching, as Raju mentioned, our high voltage battery suitable for electric buses and commercial trucks in this fiscal year 2021. We have a substantial intellectual property recently acquiring 30 new patents and continuing filing for new patents. We believe we are well positioned in this lift truck market and perhaps a leadership position. In the sustainability and climate change mitigation area, I'm really pleased that each hardworking electric lift truck, which operates seven days a week and sometimes twenty four hours a day, eliminates 12 to 16 times more greenhouse gases than an electric car. As an example, 100,000 lift trucks is equivalent to 1,500,000 or so electric trucks in reducing greenhouse gases like carbon dioxide and carbon monoxide. These electric Zipt trucks should be a priority application for climate change mitigation. This has been a transformative year for the company, record revenues, improved balance sheet and two sequential quarters of positive EBITDA. I believe the future is very bright for Electrovaya. That is why I keep making personal financial guarantees as needed in order to satisfy the company's obligations under the convertible debentures or promissory note. I'm confident our strategy will deliver significant value to our shareholders. This concludes our remarks this morning. Richard, Raj and I would now be pleased to hold a question and answer session. Daryl, please open the line for questions. Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Devin Schiller with PI Financial. Please proceed with your questions. Well, hi guys. Good morning and congrats on the strong quarter here. I would just like to touch base on your guys' FY 2021 revenue guidance here of over $28,000,000 What do you believe the split will be between direct sales and customers and OEM distributors? I really wouldn't like to go there. I think that what we've seen in the past year is probably about a fiftyfifty split. I would suggest that we would expect the OEM relationship to strengthen and probably get more through that channel. But at the same time, we have a very robust direct sales channel. So I wouldn't really want to speculate as to breakdown between the customer components there. Yes. I think the excretable side is to increase. We're adding sales staff for the direct sales portion as well. Okay. Yes, that makes sense. You guys also mentioned you guys are expecting a decent amount of repeat orders here. I guess in this guidance, should we also be expecting some potential customer wins? Yes, I would most definitely think so. Yes, we are certainly getting a profile in the marketplace, which as we move forward will only increase the momentum. And certainly, our existing customer base is very robust and continuing to place orders. But Raj, it's probably best to speak on this. Most definitely, we'll be seeding for new customers, which we already have been. So the revenue will be coming from a mix of both new customers as well as existing ones. Okay. And I believe you guys mentioned that you're looking to add some new sales staff in both Canada and The U. S. Can you maybe touch base on just how many you have right now and how many additions are planned? Shailesh here. We have a tremendous reach with our OEM and we also our sales staff works very, very closely with the OEM sales. So sometimes we have a multiplier effect as against one salesperson going in. It's almost like a team sales going on and the OEM sometimes moves away when he sees that it's an upgrade happening. And so I won't quantify the numbers. It's really a team effort. Okay. No, that's great. I'll jump back in the queue for now. Thank you. Thanks. Okay. There are no further questions at this time. I'd like to hand the call back over to management for any closing remarks. Thanks, Jaro. That concludes our call. Thank you for listening this morning. We look forward to speaking with you again after we report our fiscal first quarter twenty twenty one results. In the meantime, we wish you all good health and stay safe. Thanks. Thank you. This does conclude this morning's call. Thank you for your participation. You may disconnect your lines at this time.