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Greetings, and welcome to Electrovaya's Q3 financial results conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Richard Halka. Please begin.
Thank you, operator. Good morning, everyone, and thank you for joining us for today's conference call to discuss Electrovaya's fiscal 2019 third quarter financial results. Today's call is being hosted by Dr. Sankar Das Gupta, CEO of Electrovaya; and myself, Richard Halka, Executive Vice President and CFO.Yesterday, Electrovaya issued a press release concerning its business highlights and financial results for the fiscal third quarter ended June 30, 2019. If you'd like a copy of the release, you can access it on our website. If you would like to view our financial statements and MD&A, 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 related to forward-looking information. We will provide information relating to our current views regarding trends in our markets, including their size and potential for growth, and our competitive position in 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 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 Q3 2019 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 the numbers discussed on this call are in U.S. dollars unless otherwise noted. Now I'd like to turn the call over to Dr. Sankar Das Gupta. Sankar?
Thank you, Richard, and good morning, everyone. We are pleased that you have all joined us this morning for our Q3 2019 financial results conference call. Customer demand for our lithium-ion batteries continues to accelerate at a strong pace. We reported a nearly threefold increase in revenue in the fiscal third quarter compared to Q3 last year and our order backlog continues to be robust. Increase from both new and existing customers is at an all-time high. Companies across the Materials Handling Electric Vehicles field, in the automated guided vehicles and energy storage industries are increasingly interested about our products and what they can do to enhance safety, productivity and give value to their operations. As we announced yesterday, we have now delivered batteries to commercial operations at 26 sites in the United States and Canada, Mexico and Costa Rica. These sites are owned and operated by large blue-chip companies that are recognized globally as being amongst the best in their field. In many cases, we are getting repeat orders from customers that are very satisfied with the performance of our products.One of the reasons our batteries are in strong demand is that we continue to enhance and produce various different models of them so that they can be used widely in the industry. We announced in June that we have launched more than 25 different lithium-ion ceramic battery models for the electric forklift market. It is important to remember that we initially launched with 2 forklift battery models in late 2017. Our team worked very hard to develop further products so that today we have batteries which can run 24 volts, 36 volts, 48 volts and now the 80-volt batteries are available and can accommodate the vast majority of electric forklift trucks in North America. We believe we have truly developed a very outstanding product line. We also recently announced that we are bringing in advanced features to our EV44 cell, including higher energy density and lower cobalt content. So our research and development and innovation continues, and really, the focus is how can we do things better to meet the needs of our customers and enhance the value of our product to them.While our priority is the electric forklift market, we are also expanding into other verticals which have the same mission-critical performance needs of high cycle life, safety, energy, power and faster charging. As we have previously stated, we are working with commercial bus companies as part of our $2.9 million development program to develop high-voltage battery packs for electric buses. During the third quarter, we received our first purchase order for an electric bus battery system. We hope it is the first of many and that we can capitalize on this market as it emerges. Electric buses like the Materials Handling Electric Vehicles work long hours, sometimes 16 to 20 hours a day and often 7 days a week.We believe our business outlook remains very positive. Lithium-ion battery adoption in the Materials Handling Electric Vehicles and in the Automated Guided Vehicles continues to expand rapidly. Internally, we have increased sales this year while reducing costs and becoming a much leaner and more efficient operation, bringing us closer to profitability. And we are working to address our working capital position so that we can meet the growing demand for our batteries. Finally, I'm very pleased to note that John Macdonald joined the Electrovaya Board this week. He was the first employee and CEO of Enercare, which was acquired by Brookfield Infrastructure last year for CAD 4.3 billion. You can read his biography in the news release we issued on Monday. I will point out for now that he has more than 3 decades of senior management experience, has raised more than $2.5 billion in financing with much M&A experience. He is an ideal fit for Electrovaya today as we focus on growing our business and becoming sustainably profitable. I will now turn the call over to Richard to review our fiscal third quarter results in greater detail. Richard?
Thank you, Sankar. Revenue for the 3 months ended June 30, 2019, was $1.2 million compared with $400,000 in the third quarter last year. The nearly threefold increase was attributable to the fulfillment of orders and recognition of revenue from other projects. Gross profit for Q3 was $400,000 or 35% of revenue compared to slightly negative balance last year. This reflects higher revenue in Q3 this year. EBITDA was negative $600,000 versus $1.7 million in Q3 2019. This positive variance was due to substantial reduction in R&D expenses and overheads in the third quarter as those expenses were applied, one to the electric bus project but also a true and absolute reduction in our G&A.Net loss from continued operations was $1.2 million in the third quarter compared to a net loss of $2.5 million in the prior year. The reduced net loss is primarily attributable to significant reduction in operating expenses. Our total operating expenses were $1.5 million in Q3 2019 compared to $2.5 million in the same quarter last year. We have now reduced expenses for 4 consecutive quarters and we are working hard to identify further cost-saving opportunities.I'll now briefly review our results for the 9 months ended June 30, 2019. Revenue was $4.4 million, in line with last year. Gross profit was $1.6 million or 36% of revenue compared to $1.2 million or 26.5% of revenue in the comparable 9 months last year. We had a net loss from continued operations of $400,000 compared to $7.8 million in the prior year. The smaller net loss was partially offset due to the gain of $4.2 million from the sale of capital assets.Turning to our balance sheet. We had $200,000 of cash and cash equivalents as at June 30, 2019. This compares to $100,000 as at September 30, 2019 -- 2018. We used a total of $1.7 million of cash in operating activities during the first 9 months of the year. We continue to manage our working capital very carefully. Inventory was $900,000 as at June 30, 2019, compared to $1.8 million as at September 30, 2018. The decreased inventory is due to the continued fulfillment of purchase orders. Overall, we are expanding sales, increasing margins and maintaining a disciplined cost control. We're also establishing relations needed to access essential financial resources to grow our business. I'd now like to turn the call back to Sankar to wrap up.
Thank you, Richard. Our focus market is very strongly into the Materials Handling Electric Vehicle market. We believe this market is very large and is starting to evolve from using lead acid batteries to lithium ion. There are about 1.5 million electric forklifts in use today. If you assume that conservatively that even 5% of them are upgrading from lead acid batteries to lithium ion in a year, that is a $1.8 billion addressable market. And of course there are the new electric forklift builds. We believe that somewhere between 150,000 to 170,000 of these electric vehicles are being sold in North America every year. There is an increased demand for these new vehicles to be powered by lithium-ion batteries. So we think that the replacement market, plus the market for new OEM vehicles, is probably north of $2 billion, $2.5 billion annually. And North America makes up about 25% of the global market for new electric forklift business. It is a large addressable market. And just today, it's probably larger than the electric car market in North America today. We are focused on selling both replacement forklift batteries and batteries for new builds. We've gained excellent traction in a short period of time. You can find our batteries in multiple locations: in the retail and distribution sector; in the furniture sector; cold storage warehouses; manufacturing, where they're using 3-shift production; food production; and in many other diverse industries. Our customer base includes many of the world's leading Fortune 500 companies, including many who are in the top Fortune 50 or Fortune 100. These companies are very sophisticated. They understand the performance boost they get from our products. And we are gradually -- have started upgrading their electric forklift fleets with our lithium-ion batteries. On the new build side, we continue to strengthen our relationships with the OEM. Our sales agreement with Raymond Corporation, which is 100% subsidiary of the Toyota Material Handling Group, is a good example of that. It's an opportunity to significantly increase both awareness and sales of our battery systems as this market emerges.So we believe we are on this right strategic track. We're growing our customer base, it's increasing sales, upgrading and expanding our product line and building more and stronger industry relationships every day and large sophisticated companies started purchasing our products. The industry, we believe, will be moving and is moving to lithium-ion batteries. We have an outstanding team in place with the vast knowledge base and, as Richard pointed out, we have a very low-cost operating model. If you think about the addressable market that I just mentioned, we only need to capture a very small portion of that to turn Electrovaya into a highly profitable corporation. So we think our future is very exciting. This concludes our remarks this morning, and Richard and I would now be pleased to hold a question-and-answer session. Brock, please open the lines to questions.
[Operator Instructions] Gentlemen, there appears to be no questions at this time. I'll turn the call back over to Dr. Sankar Das Gupta for closing remarks.
Thank you, Brock. Well, that concludes our conference call this morning. Thank you for listening in and for your continued interest in Electrovaya. We look forward to speaking with you again after we report our fourth quarter and year-end results. Have -- everybody, have a wonderful day and, of course, enjoy the rest of the summer. Thanks.
Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.