Electrovaya Investor Webcast Presentation (December 5, 2024)

Hi Glenn, thanks so much for the great introduction. It's a pleasure to be here with all of you this afternoon. I'm here to talk today about Electrovaya, give everyone an overview of the company, what exciting technologies we have, and how we're applying this to the markets we've targeted. We'll also talk a little bit further about our plans in Jamestown, New York and our exciting directions that the company is taking in the near and long term. The starting photo here is of our Jamestown building in Western New York, and we'll come to that in more detail shortly. As Glenn mentioned, we will be discussing forward-looking statements and we of course appreciate it if everyone took note. Now, just taking a step back, what is Electrovaya all about? Electrovaya is a lithium battery technology and manufacturing company, and we are very much focused on leveraging two key technology differentiations. One of them is with respect to battery safety. Many of you have read terrible articles about lithium batteries catching fire, so safety is a key aspect of lithium batteries which needs to be dealt with. Electrovaya has proprietary ceramic separator technology which greatly enhances battery safety. To date, this technology has been deployed in about 30,000 battery systems and we have a perfect safety record. Furthermore, the technology has clearly demonstrated safety beyond what typical lithium batteries do. Our battery systems pass UL 2580 certification, which is a UL electric vehicle designation that very few battery companies have been able to achieve. We believe we're going to be the first battery company to achieve this for high-voltage battery systems, and this testing requires everything from fire propagation testing to very strenuous mechanical testing. That's on the safety side. We believe that gives us a strong differentiation over our competition. The second is on longevity. What we mean by longevity is the number of cycles the battery can do before it reaches its end of life. Many of you are probably familiar with your phones — your phone battery, once it reaches about 80% of its initial capacity, it starts to die off very quickly. 80% is typically what the industry uses as end of life in a battery. Typical batteries used in consumer electronics like phones will do maybe 1,000 cycles, and in electric vehicles — passenger electric vehicles — a bit longer, maybe 2,000 and sometimes a little bit further. But Electrovaya's battery technology, which is agnostic to the chemistry, can take a standard NMC chemistry and we do 10,000-plus cycles on our lithium battery cells. When you take a look at these two key differentiations — safety and longevity — it makes Electrovaya very, very applicable to a broad range of applications, but especially mission-critical and heavy-duty applications. These are applications which often need a higher level of safety and longevity due to the heavy use of the application. The first target market we went after was in material handling. Why was this market something that we picked? Material handling, especially this time of year, vehicles — whether they be forklifts or robots — they're operating 24/7 in many large companies' distribution centers, and they need batteries to keep up with that operation. They need performance to be unchanged no matter how many charges that battery takes nor how quickly those charges get made. They need a very good battery with exceptional longevity, which we provide. The second key aspect they're looking for is these vehicles are operating indoors, they're getting charged rapidly and extensively, so safety is paramount — and that's also something we can provide. We went after this market several years back and it's blossomed quite nicely. Today we're powering over 14 Fortune 100 customers, including some of the largest names in the world, and also now in over 200 warehouses. We're getting into additional markets right now. We're targeting everything from aerospace and defense to certain commercial vehicles including construction and mining. And then finally, on domestic manufacturing — this is something we're very excited about. We recently announced an approved loan from the US Export-Import Bank of $51 million, which will really take care of the funding of all the engineering and construction for our Jamestown facility. That's going to provide domestic manufacturing, it'll likely lead to improved margins and also probably most importantly expanded capacity, and we also believe it's going to attract additional business. On the financial front, we believe we're about to complete six quarters of positive EBITDA. The company is most definitely past a key inflection point. Our margins are probably one of the highest for lithium batteries, and we're on path to grow very nicely in fiscal 2025 with growing revenue and headed to that good profitability. Basically, our break-even point is approximately on an EPS level — not on a cash flow basis, on a cash flow basis it's less — but on our EPS level about $50 million per annum, and we will exceed that in fiscal 2025. In terms of customers and partners, we have a great roster. In terms of strategic partnerships, we work very closely with the Toyota Material Handling group, including groups like Raymond and Bastian Solutions, where we have a battery system which is distributed by Raymond under the Energy Essentials brand. It's been deployed in countless warehouses across the country and overseas. More recently, we partnered with Sumitomo Corporation, one of the leading Japanese trading houses, and they have been actively marketing our technology and solutions to other Japanese OEMs and other potential partners across the world. We're in a very good position with these strong partnerships. In terms of who's using our batteries, it's the who's who of the Fortune 500 — some of the largest companies in the world. The largest end user of our products is an e-commerce company. Other major users, of course, are Target, Walmart, Mars, etc. A very diversified group of customers, and they generally are picking Electrovaya's technology over competition which may be cheaper, but our solution provides a lower cost of ownership and much better safety. Companies, when they're looking for the best battery solution, they're picking us. That also applies to the defense sector where they're specifically looking for the best technology possible, and there we're seeing good traction as well — recently seeing some growth and repeat orders from our first defense contractor customer. These batteries have been proven and they're deployed in many commercial operations — well over 200 warehouses. The Infinity battery technology has been well understood to have the properties that we talk about — longevity, safety. Some of those first systems that were deployed at Walmart in 2018, we've watched those systems. The degradation on those batteries is under 5% after extensive use, and they're outlasting the vehicles that they were initially deployed in. In terms of the market we're looking at, Electrovaya is looking at these heavy-duty, mission-critical markets which are large. They're not necessarily as large as the passenger electric vehicle market, but that's a market where margins will be very tight, and one Electrovaya used to participate in but with our focus on leveraging this technology and gaining the maximum profitability levels, these markets make most sense. Defense, material handling, mining, and construction — these are the types of markets we see ourselves being highly differentiated, and as a result can charge a premium for our solution. So where do we ultimately want to get to? Electrovaya believes we have the technology which is ideal for heavy-duty applications — that includes trucks, buses, construction, mining, etc. Up till now, many companies that have deployed electric vehicles for these larger types of vehicles have run into trouble, and a lot of that stems from the use of automotive-grade lithium batteries for these larger applications. It doesn't really work that well. Automotive batteries are designed for electric vehicles and their number one priority is to reduce the dollar per kilowatt-hour level for the solution — to lower the costs for battery packs in passenger EVs, which are highly sensitive to price. In commercial vehicles or heavy-duty vehicles, the life cycle really becomes the more important item rather than the upfront cost. And the second is safety. When you're scaling battery systems to being very large, the probability of a safety event becomes higher, and you need the safest lithium battery solution you can get. If you look at the media, you'll see many examples of larger electric vehicles running into trouble, especially with regards to safety, and this is something we believe our technology definitely takes care of. Fires and lithium batteries often get into the news. Some pieces of this we'd like you to pay special attention to. One key item is lithium-ion battery fires that propagate. They may start in a single cell, but what ends up happening is that single cell leads to the neighboring cell to catch fire, and the neighboring cell, and it just keeps going. Sometimes it even goes beyond that one battery pack — a neighboring battery pack or even a neighboring electric vehicle might catch fire. That's precisely what's happened in one of those photos where it appears one battery pack — the fire probably started in one battery pack and then quickly propagated to many vehicles. Why does this happen? Lithium batteries have a separator — that's one of the core components of a lithium battery, and its job is exactly what its name says: to separate the positive and negative electrode in a lithium battery and also allow the lithium ions to go through it. Those separators are generally made of plastics and they work fine until they get too hot. If they get too hot, separators will shrink and you'll have a short circuit which leads to a fire, and then the neighboring cell gets too hot, its separator shrinks, it catches fire, and so forth. That's often why battery fires are referred to as thermal runaway. In Electrovaya's case, we have a proprietary ceramic separator, and that ceramic separator is stable at much higher temperatures. What this means is it makes the probability of that cell catching on fire to be lower, but then even if you manage to get that cell to catch fire, the probability of the neighboring cell catching fire is significantly reduced over conventional technologies. And we've seen this in practice. The picture on the bottom left is an Electrovaya battery system that we've produced — about 70 kilowatt-hours in capacity. We physically set a cell in that pack on fire on purpose, and this is a fully charged battery system, fully built. The result of setting that cell on fire is that the fire remained at that one point — it didn't propagate in the battery system at all. This test was repeated at our lab, also at our key OEM partner's third-party lab, and then at UL's lab more recently. This is a clear indication of the technology and how it works in practice in a battery system. On the cycle life, again this is third-party data. On the left there, 10,000-plus cycles with very little degradation. What does this mean? This means if you did one charge-discharge cycle a day, you're looking at a 30-plus year life on a battery system. Or if you put our batteries in a typical electric car, you're looking at over three million miles on that car. This is a technology maybe overkill for passenger EVs, but ideal for vehicles which never stop — robots, forklifts, perhaps even taxis in the future. Now, when you have a battery that doesn't die, we really want to see how we can leverage that performance further, and that looks at recurring revenue models. One of which is leasing. Recently, in October, in partnership with one of our OEM partners, we presented customers with a high residual value leasing opportunity that seems to be gathering tremendous interest. Normally, only the very largest and most well-funded companies have been purchasing our batteries, and that's due to their ability to calculate the life cycle cost. But medium-sized corporations or large corporations with less funding — perhaps they can get that advantage from day one through leasing with a high residual value. That's a very exciting program. Another area is starting to see higher levels of batteries which are rented. We're already renting batteries today to that e-commerce company and we're starting to scale that up slowly, but again margins on those types of opportunities are very good. Another example is demand response capabilities. This is something we're planning to deploy in early 2025. What this does is it optimizes the electricity consumption of our batteries in a warehouse, which can be a substantial load in a building. The idea here is we would share in the savings that the utility provides. In terms of our global reach, we have operations in Canada and now in the US. We have growing sales in Japan. We'll be shipping our first battery systems to a Japanese construction vehicle OEM early in the new year, and we're seeing a lot more interest in that region and elsewhere in the Asia Pacific region. So likely we'll also establish something in Japan in the near future. Jumping to our Jamestown operation — this is what we're extremely excited about. First of all, this will give us a made-in-US domestic battery, leveraging a lot of the domestic supply chain and friendly country supply chains. This is a funded plant now with $50.8 million from the US Export-Import Bank under their Make More America initiative, and essentially they're covering all the equipment and the construction at that site. Also important is the low electricity price that we have negotiated with the New York Power Authority — already under 5 cents a kilowatt-hour delivered and 100% renewable. What this facility is going to provide us is, first of all, domestic production which is going to be very important especially with geopolitical tensions rising. Much shorter lead time in production and expanded capacity to grow. That vertical integration is also going to have an impact on the bottom line — we expect our margins to increase. And then finally, we're expecting to get production tax credits from output which will further increase the profitability of output from this facility. In terms of funding, I already mentioned Ex-Im, but there's also over $7 million worth of grants and tax credits from the state and county in New York. So that's our Infinity battery technology. Just wanted to briefly mention our solid-state battery efforts. Solid-state batteries are next-generation lithium battery technology which Electrovaya and a number of other companies are also working towards. This technology would essentially make a battery separator also act as an electrolyte in a lithium battery, thereby reducing a lot of those liquids that are used and also eliminating the use of graphite as an electrode. The outcome of this is much higher energy densities, which are very exciting because that could double the runtime of your phone or it could double the range of your electric vehicle. Still in the development stage, but why does Electrovaya think we'll be successful with this? Fundamentally, it comes down to that know-how and capability of making ceramic separators. Electrovaya, as you've seen in our Infinity technology, we know a thing or two about not only producing ceramic separators, having IP around ceramic separators, but also the incorporation of that type of technology and making commercially viable cells. That's precisely what we're trying to repeat with the solid-state battery. Here we're looking at a ceramic material which we've developed in-house with proprietary recipe and performance which will be an ionic conductor, and we're also making that into a separator. So far this is at a small cell level but results are promising and we'll continue to provide updates as we progress. With that, I'll hand it over to John to talk a little bit further about some of the financials.

John, I think we've been essentially in a cash flow positive position. We've been generating cash from operations, and so we expect this to only improve as time goes on. And of course we're very pleased to see the funding from Ex-Im and others supporting a lot of the capital outlay we have planned going forward. On the debt side, because Ex-Im is there, we are anticipating bringing in a tier one bank to take over from our current lender. That of course requires inter-creditor arrangements, etc., so that's being worked out. We're expecting of course to move forward with that as well.

I'll start with one of those, maybe we'll break those up. First of all, I'll start with the last one on the ceramic separator. Electrovaya is not the only company that's ever come up with a ceramic separator, however I would say we're the only company that has commercialized the use of that type of technology. And I would say we know a lot about it and we've perfected that type of technology to a great deal, and clearly it's been deployed in growing numbers. In terms of the competitive landscape overall, I would say this battery industry as a whole is dominated by Asian battery manufacturers, and recently we've seen what happens when you just try to fund a battery company with lots of money to make exactly the same thing that's being made in China, and that doesn't really work. So you need a highly differentiated technology in order to compete, and Electrovaya has been nimble and has clearly focused on leveraging technology advantage which we've done with our Infinity technology, and going after markets where we see ourselves having the best ability to leverage that. And that's the type of strategy we wish to continue, and we see plenty of opportunity to do well at that.

On fuel cells, I would say fuel cells — some of our customers use both fuel cells and batteries to power equipment. I don't want to say anything against those decisions, but fuel cells require very specialized infrastructure which can only be deployed — it requires a whole hydrogen infrastructure to go along with it. With batteries, you have an electrical infrastructure which is generally present everywhere. The advantage of fuel cells initially was the ability to replenish quickly through fueling, but our batteries, because the cycle life is so good, they can take a very fast charge without losing performance, and we believe that mitigates things. As time goes on, what we believe is fuel cells may depend on subsidies more. Our customers — for instance, not one of them is getting a subsidy to purchase our battery solutions, and that focus on the core advantage of the technology rather than looking at markets which are requiring subsidies gives us a lot of immunity to changes in government policy, which we fully expect to happen over the next four years.

The Jamestown facility is ultimately going to be about expansion. We already of course make lithium cells and battery systems with our current supply chain. What Jamestown will do is everything that's currently being done in China and some of what's being done in Japan and some of what's being done in Canada. So it'll be a fully vertically integrated facility that makes everything from cells to modules and battery systems. Some of those modules will be shipped to our Canadian facility and some of them will be built into full systems in the Jamestown facility. In terms of overall what the capacity means, it would probably give us an extra $200 million per annum capability in its first phase. The interesting thing about that site though is we have 52 acres. We've already looked into how that facility can be expanded further if we need to do so, and it can be done quite easily.

The last four years have had substantial disruptions in supply chains, and that's taught us a thing or two of what to do to handle things going forward. The one thing we're doing in Jamestown for instance is the sourcing of materials is really from countries like Korea, the US, Canada, and Japan primarily. We're trying to essentially give ourselves immunity from anything that happens with China. So that's something that we've been focused on. We've already been qualifying those materials over the last nine months or so. So we believe when the facility starts operations for cell manufacturing — which would be in the first half of 2026 — we'll be able to be shipping commercial product for sales around that time. And battery systems will happen much earlier — it'll happen in 2025, and that'll be augmenting what we have in our Canadian facilities.

With regards to silicon, there are good companies working on that. We've considered it, however we believe our solid-state battery development is what we're going after, which is even higher energy densities. There we're targeting about 350 to 400 watt-hours per kilogram.

We won't disclose our selling price, however we've sold cells to defense contractors, we've sold battery modules — for instance, the construction vehicle OEM, that'll be battery modules. However today, as of today, most of our sales are in battery systems, and of course that's in the material handling market. Overall, Electrovaya most definitely charges a premium for our battery solutions, which is why our margins are over 30% on battery solutions.

Data centers — so energy storage systems, stationary energy storage systems, for the most part has been a market we've shied away from because its core focus has been on capital cost of the battery solution, especially dollar per kilowatt-hour comparisons, which we don't want to get into. We want the life cycle benefit and the safety benefit. Now data centers are different because the safety benefit really comes into play there. We've already been requested by some of our existing customers in the material handling space to potentially provide energy storage solutions for backup power in sites like data centers or distribution centers, and that's a product we are currently developing. We expect to launch it in mid-2025, but its focus will be specifically on the high-end part of the market which is focused on providing better safety and better longevity for their sites. In terms of it, energy storage doesn't generate electricity — you of course have to get another source to generate. This is about storing and backup power.