Mr. Jason Roy reports
ELECTROVAYA REPORTS Q1 FY2021 FINANCIAL RESULTS - QUARTERLY REVENUE TRIPLES YEAR-OVER-YEAR
Electrovaya Inc. has released its financial results for the fiscal first quarter ended Dec. 31, 2020. All dollar amounts are in U.S. dollars unless otherwise noted.
Q1 fiscal 2021 financial highlights:
- Revenue increased to $2.6-million ($3.3-million (Canadian)), compared with $900,000 ($1.1-million (Canadian)) in the fiscal first quarter ended Dec. 31, 2019. The year-over-year revenue growth reflects growing customer demand.
- EBITDA (earnings before interest, taxes, depreciation and amortization) (1) was negative $800,000 ($1.0-million (Canadian)), compared with negative $900,000 ($1.1-million (Canadian)) in Q1 fiscal 2020. Q1 fiscal 2021 EBITDA (1) included a $500,000 ($600,000 (Canadian)) increase in R&D (research and development) expenditures as the company added more staff, along with an increased focus on areas of cell chemistry, solid state cells, system design, electronic firmware and software.
- Subsequent to quarter-end, the company raised $6.4-million ($8.1-million (Canadian)) through a private placement of common shares and the exercise of warrants and compensation options. A portion of the gross proceeds were used to reduce the outstanding revolving facility by $1.8-million ($2.3-million (Canadian)), significantly strengthening the balance sheet.
Electrovaya has not historically experienced seasonality in its business. In recent periods, however, revenue has been relatively low in the fiscal first quarter, which reflects customers' preference to defer product delivery past the holiday season and into the new year. This is due to an increasing e-commerce demand and the need to minimize changes or disruptions at high-volume distribution centres. Seasonality has also increased due to the impact of COVID-19 on the general consumer community as a result of a shift from in-person to on-line shopping, increasing the activity at distribution centres.
The transition from the Raymond sales agreement to the Raymond strategic supply agreement also caused some operational delay in shipments, as the new sales support systems were not fully in place until January, 2021. This delay in shipment is reflected by the increase in inventory of $2.4-million ($3.0-million (Canadian)), some of it being finished goods, and a decrease in accounts receivable of $1.1-million ($1.4-million (Canadian)) at Dec. 31, 2020, as compared with the Sept. 30, 2020, balances.
In January, 2021, the company announced that it completed a private placement for gross proceeds of $2.6-million ($3.3-million (Canadian)). Also in January, 2021, warrants and compensation options were exercised for total proceeds of $3.8-million ($4.8-million (Canadian)). The total gross proceeds raised from these transactions were $6.4-million ($8.1-million (Canadian)), of which $1.8-million ($2.3-million (Canadian)) was used to make a voluntary payment to reduce the outstanding balance of the revolving credit facility with the remaining $4.6-million ($5.8-million (Canadian)) to be used for general corporate purposes.
Q1 fiscal 2021 business highlights:
- The company is preparing its application for listing at a major U.S. stock exchange and, as part of the process, is asking shareholders at the annual general meeting to vote in favour of a resolution to allow a consolidation of its common shares;
- The company's UL2580 listing has been received across more than 25 different battery models, an important safety milestone;
- First product deliveries completed to a major U.S. big box retailer in January under the Raymond strategic supply agreement;
- Increased investment in R&D and strengthening of the company's patent position;
- Investment in process, production, and scale-up equipment electrode and cell-making to facilitate expanded work on its proprietary and patented unique non-NMP electrode production process and work on ancillary areas.
The company is planning to have its annual and special meeting of shareholders on Feb. 17, 2021, at 4 p.m. Eastern Time. Because of COVID restrictions, the AGM will be held virtually.
The company is asking for shareholder authorization at the meeting for a capability to consolidate its common shares, if and as needed. The company's board of directors is interested in a listing on a major U.S. stock exchange, which could expand Electrovaya's shareholder base, increase financing opportunities and increase liquidity of the common shares. A potential consolidation, if needed, enables the company to meet the minimum share price requirements for listing on a major U.S. exchange. The company has not yet made any application for listing, and there is no certainty or any assurance whatsoever that such an application will be made and no assurance that any such major U.S. stock listing will occur. For more detail on this proposal, please view the management information circular filed on SEDAR.
In November, 2020, Electrovaya announced that it received UL2580 (Underwriters Laboratories or UL) listing across its line of 24-volt and 36-volt forklift batteries. The safety certification covers more than 25 different models and is a key milestone for the company. This UL listing demonstrates the company's continued commitment to safety and quality, and also increases its sales reach as this UL listing provides a significant competitive advantage. The company's R&D and engineering teams were responsible for achieving this UL listing, which also leverages some of the key safety technologies that Electrovaya owns, including critical cell and system intellectual property.
In December, 2020, the company announced that it completed a strategic supply agreement for the supply of battery systems for Raymond's Energy Essentials battery line. The agreement provides Raymond with exclusively distributed, Raymond-branded lithium ion batteries that are UL 2580 listed and compatible with most Class I, II and III Raymond lift trucks. The battery systems utilize the latest Electrovaya NMC ceramic lithium ion battery technologies and provide a full integration with Raymond vehicles. The batteries are featured prominently on Raymond's website, and Electrovaya made its first delivery under the agreement to a major U.S. big box retailer in January.
The company doubled its R&D expenditures in Q1 fiscal 2021 when compared with Q1 fiscal 2020. The company added more staff with the focus on areas of cell chemistry, solid state cells, system design, electronic firmware and software.
The company is planning to increase its patent position in solid-state lithium ion batteries, fast charging and other areas. The emphasis on patents is being enhanced with a new patent agent with a strong background in lithium ion batteries.
The company continues to explore exciting new developments, including cell manufacturing in North America, utilizing its unique non-NMP manufacturing process and further developing new product lines, including new batteries for the e-bus market.
In January, the company purchased a large amount of cell assembly equipment from an erstwhile lithium ion battery facility in Michigan. These capital expenditures will assist in the expansion of production and localization of key components.
Positive financial outlook:
- Additional sales personnel added to the company's direct sales team and growing momentum through an OEM (original equipment manufacturer) sales network;
- UL2580 listing provides safety validation and unique competitive advantage;
- Well positioned with working capital for growth from recent equity issues and strengthened balance sheet;
- Company reiterates previously issued guidance.
Electrovaya is experiencing strong and growing customer demand for its battery products through both of its key sales channels: direct sales to end customers and OEM distribution.
The company has added direct sales staff in the United States to bolster its direct sales channel and address the lead acid replacement market. The company also anticipates growing demand from its OEM sales channel especially with the recent Raymond strategic supply agreement. Raymond is now extensively marketing and promoting Raymond's lithium ion batteries through the firm's sales network.
The company continues to have a positive outlook for 2021. Although the year has started with some sales delays as described above, management anticipates meeting its previously released guidance.
Impact of COVID-19 pandemic
Electrovaya is an essential business and has operated without major interruption during the COVID-19 pandemic to date. The company's customers include large global firms in industries such as grocery, logistics and e-commerce that are continuing to provide critical services during this difficult period. The crisis has highlighted Electrovaya's important role in helping its customers execute mission-critical applications under highly challenging conditions. COVID-19 did disturb the company's supply chain from many of its global vendors, with resultant delays in delivery of the company's products to its customers and associated cost increases.
Electrovaya considers the health and safety of its employees and other stakeholders to be of the highest priority. To mitigate any potential spread of COVID-19, the company has implemented a number of common sense initiatives at its headquarters, including increased sanitization of frequently touched surfaces, use of masks, portable air purifiers and social distancing. The company's air handling systems are continuously flooded with ultraviolet disinfecting lamps.
QUARTERLY FINANCIAL SUMMARY
(expressed in thousands of U.S. dollars)
Three months ended Dec. 31,
Total revenue $2,583 $861
Variable costs 1,762 541
Gross margin 821 320
GM% 32% 37%
Research and development 906 404
Sales and marketing 262 230
General and administrative 539 502
Stock-based compensation 44 43
Finance cost 516 896
Patent and trademark expenses 11 8
Depreciation 70 2
Gain (loss) from operations (1,527) (1,765)
Foreign exchange gain (loss) (317) (144)
Net profit (loss) (1,844) (1,909)
(1) Non-international financial reporting standard measure: EBITDA is defined as gain (loss) from operations, plus finance costs, plus stock-based compensation costs and depreciation. Management believes EBITDA is a useful measure in providing investors with information regarding financial performance and is an accepted measure in the industry. It is not a measure of financial performance under IFRS, may not be defined and calculated in the same manner by other companies, and should not be considered in isolation or as an alternative to income (loss) from operations.
The company's complete financial statements and management's discussion and analysis for the first quarter ended Dec. 31, 2020, are available at SEDAR or on the company's website.
Conference call details
The company will hold a conference call on Feb. 11, 2021, at 8 a.m. Eastern Time to discuss the Dec. 31, 2020, quarter-end financial results and to provide a business update.
United States and Canada toll-free: 877-407-8291
To help ensure that the conference begins in a timely manner, please dial in 10 minutes prior to the start of the call.
For those unable to participate in the conference call, a replay will be available for two weeks beginning on Feb. 11, 2021, through Feb. 25, 2021. To access the replay, the U.S. dial-in number is 877-660-6853, and the non-U.S. dial-in number is 1-201-612-7415. The replay conference ID is 13716417 followed by the number sign.
About Electrovaya Inc.
Electrovaya designs, develops and manufactures proprietary lithium ion batteries, battery systems and battery-related products for energy storage, clean electric transportation and other specialized applications. Electrovaya is a technology-focused company with extensive IP. Headquartered in Ontario, Canada, Electrovaya has production facilities in Canada with customers around the globe.
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