Prepared remarks
Greetings. Welcome to the Electrovaya Q2 2026 Financial Results Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, John Gibson, CFO. You may begin.
Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q2 2026 financial results. Today's call is being hosted by Dr. Raj Das Gupta, CEO of Electrovaya; and myself, John Gibson, CFO. Today, Electrovaya issued a press release concerning its business highlights and financial results for the quarter and six months ended March 31, 2026. 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, you can access those documents on SEDAR+ at www.sedarplus.ca, the SEC's EDGAR website at sec.gov/edgar or at our updated website at www.electrovaya.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 market trends, including their size and potential for growth and our competitive position within our target markets. Although we believe that the expectations reflected in such forward-looking statements are reasonable, they do obviously 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 Q2 fiscal 2026 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 and U.S. security regulatory authorities. Also, please note that all numbers discussed on the call are in U.S. dollars, unless otherwise noted. And now I'd like to turn the call over to Raj.
Thank you, John, and good evening, everyone. It is a pleasure to speak with you today as we review our second quarter fiscal 2026 results. Despite some supply chain disruptions stemming from recent geopolitical developments, we continued steady progress during the quarter across our financial, technology and strategic business objectives. While our material handling products continue to form the foundation of our revenue base, the quarter also marks the commencement of commercial deliveries of our latest battery systems for robotic applications in addition to shipments to two defense contractors. These developments reflect the continued expansion of our technology platform into new and strategically important verticals. We remain highly focused on new product development, continued advancement of our core battery technologies and the ramp-up of our Jamestown manufacturing facility, all of which we believe will play a central role in supporting the company's long-term growth and success. During the quarter, we also commenced shipments of our latest high-voltage battery systems. We expect high-voltage vehicle platforms to scale over the coming years and become a meaningful contributor to revenues beginning in fiscal 2027. In the airport ground support equipment sector, testing activities have continued to progress well, and our trial battery systems are now operating commercially at multiple airports. However, recent disruptions within the airline industry and broader macroeconomic uncertainty may impact the timing of capital spending decisions and near-term order flow within this sector. Turning to product and technology development, we continue to advance our technology and product portfolio, spanning advanced ceramic separator technologies through to next-generation software solutions. Our most significant development initiative is focused on energy storage products, which we expect will become a showcase of the company's integrated battery system, cell and software capabilities, delivering differentiated solutions for mission-critical energy storage applications. Electrovaya is developing products and technologies that fundamentally build upon our core strengths in advanced ceramic separators, cell and system safety, longevity, cycle life and high-performance battery operations. I'm particularly excited about our push into energy storage. This is a sector that I personally led at Electrovaya more than a decade ago before the market became increasingly commoditized. Today, however, with the rapid growth in demand for mission-critical energy infrastructure, we believe that the market environment has fundamentally changed and presents a significant opportunity for differentiated technology solutions. We believe our energy storage platforms can deliver an outsized impact through a combination of high power density, long cycle life and industry-leading safety. Our objective is to enable customers to achieve more with a smaller and more efficient battery solution, improving both operational performance and overall economics. In addition, given the exceptional safety and field performance record of our Infinity technology, we believe mission-critical applications will represent a key target market for the company. We've already demonstrated the strength of this approach within the material handling sector, where we successfully introduced a premium battery solution to some of the world's largest companies. We believe a similar strategy can be applied to energy storage infrastructure markets. Within our energy storage product portfolio, which is in development, we are advancing both AC-coupled 1,500-volt systems and DC-coupled 800-volt system architectures. These platforms are being engineered to meet UL 9540A certification standards while supporting materially higher power densities than conventional lithium-ion energy storage systems. Fundamentally, our goal is to deliver greater performance and capability with a smaller overall battery footprint. I'm also encouraged by the continued progress of our next-generation ceramic separator development program, which is expected to deliver further improvements in battery performance and capability. To support future commercialization, we are planning scaled manufacturing expansion at one of our Ontario facilities with production targeted to commence in 2027. In parallel, our solid-state battery development efforts have accelerated following the installation of upgraded infrastructure and a new dry room earlier this year. As I mentioned previously, we are also advancing rapidly towards the development of an ultra-fast charging lithium-ion cell and accompanying battery systems. This technology integrates a next-generation niobium oxide anode with the company's Infinity Platform to deliver enhanced safety, long cycle life and charging times of approximately five minutes. In-house testing of prototype cells is ongoing and has successfully demonstrated the targeted high rate charging capabilities alongside excellent cycle life performance. We've also already produced prototype battery modules utilizing these cells and are actively designing complete battery systems targeting applications such as robotics, data center infrastructure support and other high-power industrial markets. We are currently targeting customer sampling this year with commercial availability expected in 2027. Finally, regarding our Jamestown expansion, I was at the facility yesterday, in fact, and I'm very pleased with the significant progress being made in site preparation and infrastructure development. Construction of the dry rooms is underway. Building floors have been reinforced to support advanced manufacturing equipment and a number of additional facility upgrades are progressing on schedule. Most importantly, we continue to strengthen the leadership and technical expertise required to successfully scale the operation. Our cell manufacturing lead for Jamestown, Ok-soo Han, recently joined the company and has already relocated to the region. Ok-soo has been based in Michigan since 2015 and previously led new cell product introduction initiatives at LG Energy Solutions. In addition, we have continued to add other key personnel, including process engineers and manufacturing specialists with experience across several major North American battery operations. Along with our ongoing capital equipment investments at the site, experienced talent will be critical to the successful execution of our long-term manufacturing strategy. The Jamestown expansion remains a core component of our plans to increase production capacity and support domestic manufacturing, particularly for our future energy storage and defense-related product lines. With that, I will now turn the call back over to John for a detailed review of our financial results.
Thanks, Raj. Electrovaya continued its steady growth through the second quarter of fiscal 2026. As Raj mentioned, the company did experience supply chain issues due to the current geopolitical and macroeconomic environment. At the end of the quarter, the company had approximately $1.4 million of finished goods waiting to be shipped solely due to the supply chain delays. It's important to note that revenue is only recognized once the units are delivered to customers. Despite these issues, revenue for the quarter was $18 million compared to $15 million in the prior year, year-over-year growth of 20%. Revenue for the six-month period was $33.6 million compared to $26.2 million in the prior year, year-over-year growth of 28%. Gross margin for the quarter was 33.4%, an increase of 230 basis points over the prior year gross margin of 31.1%, and gross margin for the six-month period was 33.2% compared to 30.9% in the prior year. As is the case with previous quarters, the gross margin is primarily driven by product mix. Managing suppliers, prices and tariffs continues to be at the forefront of our activities as we scale, and management believes the company is well positioned to maintain these strong margins as we continue through 2026 and into 2027. Operating profits increased significantly year-over-year. Operating profit for the quarter was $2.2 million compared to $1.4 million in the prior year, an increase of 56%, and operating profit for the six-month period was $3.6 million compared to $1.2 million, an increase of 195% year-over-year. Net profit for the quarter was $1 million compared to $0.8 million in the prior year, and net profit for the six-month period was $2.1 million compared to $0.4 million in the prior year, a significant increase of 404% year-over-year. Q2 represents the fifth consecutive quarter of net profit and positive earnings per share. Adjusted EBITDA for the quarter was $2.8 million compared to $2 million in the prior year, an increase of $0.8 million or 41%. Adjusted EBITDA for the six-month period was $4.8 million compared to $2.6 million in the prior year, an increase of 89% year-over-year. EBITDA grew in the current year due to the improved margins and managing operating costs. Adjusted EBITDA as a percentage of sales was 15.7% for the quarter and 14.3% for the six months. The company generated positive cash provided by operating activities of $4.3 million compared to $3.2 million in the prior year and cash used in investing activities of $5.6 million compared to $4.8 million in the prior year. The cash used was driven by increases in accounts receivable, inventory and prepaids. The company ended its first quarter with positive net working capital of $57.8 million compared to $26.2 million in the prior year, a current ratio of 7.7 compared to 3.9, a clear indicator of improved financial performance and management is committed to continuing this positive trend. At the end of the quarter, total debt was $21.9 million compared to $13.1 million in the prior year. This debt includes both working capital debt and the debt from the EXIM facility, while the prior year figure is solely working capital. Working capital debt was $12.2 million at the end of the quarter, a slight decrease of $0.9 million over the prior year. And at March 31, the company had drawn $19.8 million from the EXIM loan. The company made the first interest payment on the EXIM loan at the end of the quarter. The company continues to utilize cash from the equity raise for engineering and R&D efforts. At the end of the quarter, the company had $20.4 million in unrestricted cash on hand and availability within its banking facility of $7.8 million. We believe we have adequate liquidity to support our expansion into new verticals and anticipated growth as we continue through fiscal year 2026. Finally, we are seeing some impact from the current geopolitical environment and resulting elevated energy prices on customer ordering patterns, particularly as uncertainty around operational costs, supply chain and regional demand continues to evolve. As a result, we may see a portion of orders that we had previously anticipated within the current fiscal year being deferred with some customers taking a more cautious approach to capital deployment. However, we are also seeing some customers potentially increasing their demand from our initial expectations, which may compensate for any disruptions. While underlying demand for our products remains strong, given this potential uncertainty, we may see a portion of this activity shift into fiscal 2027. We continue to engage closely with our customers and remain confident of our long-term outlook with these timing dynamics reflecting prudence rather than any structural change in demand overall. That concludes our financial overview. Raj and I would now be pleased to hold a question-and-answer session.
Questions and answers
Your first question comes from Colin Rusch with Oppenheimer. This may compensate for any disruptions. While underlying demand for our products remains strong, given this potential uncertainty, we may see a portion of this activity shift into fiscal 2027. We continue to engage closely with our customers and remain confident of our long-term outlook with these timing dynamics reflecting prudence rather than any structural change in demand overall. That concludes our financial overview. Raj and I would now be pleased to hold a question-and-answer session.
Could you give us an update on validation and testing of the line that will go into Jamestown? I just want to understand how far along you are in terms of that testing and when we might expect delivery of all that equipment into the facility in the U.S.
Colin, good to hear you. There are a number of different pieces of equipment. The cell manufacturing equipment is coming primarily from a Korean supplier. For that, we're setting up the entire line in Korea, and we'll be conducting a pretty extensive factory acceptance test plan there. We'll have a very large team from Jamestown primarily out there for a period of six weeks, where we'll run the entire production line essentially from start to finish. That's a somewhat unusual factory acceptance test plan, but we've done that to de-risk operations in Jamestown and reduce site acceptance test work. That testing will start occurring late summer. Earlier in the summer, the same sort of activity will occur for our module production lines, which are highly automated, and that will be a bit shorter since it's less complicated. Other equipment—many ancillary infrastructure items—are already on site. So dry rooms, switchgear and a lot of the infrastructure are already in Jamestown. There is, more or less, a permanent construction crew on site right now.
Excellent. That's super helpful. And then with the niobium batteries, obviously, there's a lot of potential opportunities with that product. I just want to get a sense of what the form factor looks like right now and how big these batteries are, like how much capacity they'll ultimately have as you start to roll them out, because there's certainly a number of different form factors that they could end up in different duty cycles. Just want a sense of that initial trajectory on that product.
Essentially, with the niobium oxide, we've partnered with a leading technology player who developed the anode material, combined it with our Infinity Platform—our ceramic separator and unique electrolyte—and we're getting higher rate performance with our platform versus a standard setup. The cells we're making with this new material are large cell format, about 40 amp-hour cells, which would allow us to make larger battery systems, which we think is what the market would want for this type of technology. We're targeting both the robotics segment—we have a product being developed for that—and rack-based energy storage systems. The rates we're achieving are over 10C in battery terms, enabling roughly five-minute charge and five-minute discharge, which is very high power performance for a battery. It's quite exciting, but it's still early, so it's hard to say exactly how this will progress, but it's moving quickly.
The next question comes from Eric Stine with Craig-Hallum.
Maybe we could just talk a little bit about the guidance qualification. So I just want to be clear, I guess I was unclear. So are you seeing some impact to order patterns now? Or is this just kind of being prudent in taking your typical approach to be conservative that it is possible that you see it? I guess that would be first. And then second, is there a way you can give at least a high-level idea of what sort of a range or amount we are talking about?
We've not seen significant impact to order flow to date, but with the current global environment, there is a chance that it does happen. So while some customers may slow down their orders, we are seeing some customers potentially speeding up orders. It's difficult to determine the full impact on the fiscal year, which is why we wanted to communicate the potential for timing shifts to date.
May I expand a little bit on that? For instance, the airport ground equipment is a new space for us. I would say the current geopolitical situation is affecting what may have been earlier order flow, pushing some activity further out. We haven't necessarily seen direct impacts yet, but we've heard chatter that some capital budgets in some customer segments may be getting pushed. At the same time, potentially one of our largest buyers might be increasing their demand beyond what we had initially expected. So there's a lot of noise at the moment, creating some difficulty for us in predicting how the rest of the fiscal year is going to go. But in general, demand signals for our products are very strong. It's just a relatively unpredictable time, and it's always hard to give specific guidance.
Right. No, I think it's prudent to take that approach given everything that's going on. Okay. Maybe you mentioned airport ground support equipment. Even though there's a possibility that things get pushed a bit, your commentary seems to indicate that things have taken a bit of a step forward. I think previously, you talked about deployed at two airports and a pilot. This go around talking about that it's deployed at multiple airports and that it's more commercialized. I don't know if I'm reading too much into that or not.
It's not commercialized in material terms at this point. The batteries, which I would call demonstration batteries, have been purchased in very small numbers. They are being used in commercial activities at the airports, and the airline seems to be happy with them; otherwise, we would have heard. But I do believe these airlines are pushing back some of their capital expenditures due to the higher fuel prices.
Okay. Maybe last one for me. As you've talked about emerging applications and energy storage, that has been positioned as likely a large market but perhaps a bit further out. Today it seems like you are more optimistic and that it may have moved forward a bit in terms of contribution to your business. Correct me if I'm reading too much into it.
No, you're not. We're aggressively pursuing this segment. We've been in discussions with a wide array of potential stakeholders and interested parties in this technology. The initial reception has been very strong. Our product development direction is serving a portion of the market that is not well served—short-duration, high-power mission-critical applications. There are many players looking at two-hour or four-hour energy storage, which is important but not our focus. We bring a fully FEOC-compliant, U.S.-manufactured solution. Our solutions from the Jamestown plant will be eligible for up to 40% investment tax credits, which is a strong incentive. Finally, the product is promising: our batteries work reliably in very high-stress environments already. We have a strong customer roster using our batteries inside buildings; now we're asking them to use them outside. Things are aligning well. We also recently won a Department of Energy project, which shows momentum. We'll use these products ourselves at Jamestown to improve power reliability, replacing diesel gensets. We're hiring people to support this and adding key personnel, including a Head of Product Design and someone for high-power, high-thermal modeling who came from StoreDot. We're going all in on this, and I think it can rapidly become a significant part of our business.
The next question comes from Theo Genzebu with Raymond James.
Just, Raj, piggybacking off your last comments on energy storage. It clearly appears to be becoming a much larger strategic focus for the company. At this stage, are customer discussions primarily centered around pilot-scale deployments, or are you beginning to see interest around larger multi-site commercial opportunities? Any color on that would be great.
We're looking at both pilots and larger opportunities. Both are important. We've started providing pricing for larger opportunities, and we also want to support our existing customer base. There's an opportunity to upsell energy storage to buildings that already have Electrovaya forklift batteries. If a building has 100 Electrovaya batteries inside, there's an opportunity to put an energy storage system outside that reduces electricity costs. There are also opportunities for single customers to deploy larger scale systems. So we're engaging across multiple opportunity types.
Okay. Thanks for expanding on that. You mentioned FEOC compliance. Are you beginning to see that become a more important competitive differentiator in procurement discussions at all?
I think so. We won't be the only manufacturer with that capability, but it narrows the field for customers who require that compliance, so it can be an advantage.
Maybe last one. Last quarter you highlighted the start of commercial robotics activity and increasing engagements with several OEMs. Can you frame how those engagements have progressed over the last few months and whether you're beginning to see broader fleet-scale deployment discussions emerge?
Yes, that is progressing well. This last quarter we shipped 300 packs, and that will continue and accelerate. We're adding additional OEMs. It takes time for qualification and validation, but we're working with a handful of OEM partners, often very large companies, and we're developing more as time goes on. It's already our second revenue generator after material handling, and it's going to grow. We're very bullish about that segment.
The next question comes from Craig Irwin with ROTH Capital.
The first question I have is about backlog. In your press release you reference backlog being approximately $100 million to $125 million, similar to last quarter. Can you update us on backlog trends? Has your backlog been flattish sequentially quarter-over-quarter? Are we seeing churn? What do we need to see for customers to commit around Jamestown facility capacity expansion and new technologies?
I'll take that. The figure we use is a combination of backlog, frontlog and pipeline. Backlog is orders in hand, frontlog is orders we know are coming, and pipeline are those we have good certainty about. That combination produces the $100 million to $125 million number. That number hasn't really changed from last year to this year. Increases and decreases in the three categories have offset each other. That figure covers more than a 12-month outlook; it spans 2026 into 2027. Some of the frontlog and pipeline will go to Jamestown. Also, that number reflects only material handling; it does not include robotics, energy storage, airport ground equipment or defense. So when you bring other verticals into the conversation, we don't have concern about downtime or lack of utilization at Jamestown.
To add, for material handling specifically, customers often place orders at the last moment. For example, today we received an order over $1 million that requires delivery within two weeks. We were expecting that order and had it in the pipeline. That's often how material handling works. Other sectors are more traditional and provide longer forecasting, making them more predictable. We have key relationships that provide good forecasting, including our OEM partners and some large end customers, and that's how we assemble these figures. Timing can always shift, and that's accounted for in our forward-looking information.
Understood. Second, on energy storage and your technology. When we look at other technologies like lithium titanate, they are expensive but have impressive safety and cycle life. Your product is sold at a modest premium to typical industrial lithium but offers a vastly superior profile, potentially 9,000–14,000 cycles. That should be compelling. Can you talk about where you stand in conversations with large customers? Has third-party test data been interesting to them? Are you in advanced discussions with specific hyperscalers, or is your approach to build and market and let customers choose?
The product performance is compelling, which is why we're pursuing the space aggressively. For the larger systems we're developing, we've been presenting specifications to a wide variety of potential end customers, including one you could classify as a hyperscaler and a few others supporting hyperscalers. We're getting good feedback. However, the product isn't quite ready yet; we're still in development and aim to bring it to market coinciding with the start-up of the Jamestown plant in early 2027 when we'll be making cells and modules there. The lithium titanate product is one we admire and has done well in the robotics segment; we're targeting similar customers with higher performance and lower cost.
Last question: robotics. Can you update us on the applications you're serving there? Any new customer interest or progress with existing customers where we might see commercial ramps over the next couple quarters?
The ones we're delivering to now primarily go into surveillance or similar machines. Most of the ones we're in discussions with are in autonomous material handling devices. We already have two that are validated and will go into production later, and we have a number of other discussions. These customers can be American or Japanese companies. There's a lot of activity and discussions taking place. Nothing material in humanoid robots at this point, but that could evolve.
Next question comes from Jeffrey Campbell with Seaport Research.
Congratulations on another strong quarter. Regarding storage products, can you help us understand what significant scaling would look like from a financing perspective? Will this be lease, lease-to-own, or will customers own it? Will you bring in financial partners to take tax benefits? Any color would be appreciated.
We expect to offer a number of options tailored to each customer. Some customers will prefer to purchase and take tax credits; some may prefer leasing or lease-to-own arrangements where it benefits them for operational reasons. It's customer-specific. Initially, I expect more customers to purchase storage units, so we likely won't bring in a financing partner at first. If we find leasing becomes more advantageous at scale, we'll consider financing partners and evaluate the best approach.
Glad to hear solid-state battery work is accelerating. Would that naturally be applicable to certain military applications? Is the traction you're getting with Infinity technology paving the way for solid-state testing with defense customers when it's ready?
Yes. We have developed good relationships in the defense space already with the Infinity technology. When the solid-state platform is ready, we will bring it to those stakeholders. It's not productive to bring something premature to potential commercial activity, so we're not there yet. Work had been limited earlier due to infrastructure and equipment, which has now been resolved. It's not our top priority compared to other efforts, but we are not ignoring it.
We've reached the end of the question-and-answer session. I would like to turn the floor back over to management for any closing remarks.
Thanks so much. That concludes our call this evening, and thanks for listening. We look forward to speaking with you again after we report our third quarter 2026 results.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.