Earnings Call Transcript - ELVA Q3 2025

Operator, Operator

Good day, everyone, and welcome to the Electrovaya Third Quarter 2025 Financial Results. It is now my pleasure to turn the floor over to your host, John Gibson, Chief Financial Officer at Electrovaya. Sir, the floor is yours.

John Gibson, CFO

Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q3 2025 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 3- and 9-month period ending June 30, 2025. If you would like a copy of the release, you can access it on our website. If you want to view our financial statements and management discussion and analysis, you can access those documents on the SEDAR+ website at www.sedarplus.ca or on the SEC EDGAR website at sec.gov/edgar. 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 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 Q3 fiscal 2025 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 the Canadian and American security regulatory authorities. Also, please note that all numbers discussed on this call are in U.S. dollars, unless otherwise noted. And now I'd like to turn the call over to Raj.

Rajshekar Das Gupta, CEO

Thank you, John, and good evening, everyone. It is a pleasure to address you today as we discuss our Q3 fiscal year 2025 quarter. The quarter marked another period of strong momentum for Electrovaya as we continue to deliver significant growth in revenue and profitability while advancing our industry-leading Infinity technology into an expanded range of applications. We achieved a second consecutive quarterly profit with revenue growing 67% year-over-year to over $17 million. Importantly, our adjusted EBITDA was strong at nearly $3 million and about 17% of revenue. We believe we can continue this growth trajectory into the current quarter and beyond as we leverage continuing demand growth from our core material handling sector and as we start seeing the contribution from other developing verticals. Operationally, we continue to see strong momentum from our OEM partners and leading end customers in the material handling sector. During the quarter, we secured more than $21 million worth of orders, bringing total orders to over $65 million in the 9 months ending June 30, 2025. This steady order flow is backed by a much larger pipeline of projects, primarily with a number of major Fortune 500 and Fortune 100 end customers, along with our OEM partners. To address increasing demand, we initiated a second shift at our Mississauga facilities in June and began some assembly operations at our Jamestown facility in May. These adjustments are expected to help us meet growing demand for our existing core battery systems, but also support the launch of new products for other sectors. Electrovaya's advanced lithium-ion battery technology is fundamental to our success. It offers industry-leading cycle life, outstanding safety, and competitive energy and power density. This provides a significant advantage for mission-critical applications or those demanding superior safety and performance. We believe this is gaining increasing recognition in the industry, particularly as sectors valuing such performance, including e-commerce, robotics, and defense, are poised for rapid growth. We are particularly focused on the robotics sector. Robots and autonomous vehicles are designed for continuous nonstop operation independent of human operators, which is critical to their overall value. Given that these devices often operate indoors and in large numbers, safety and reliability are also paramount. This sector is experiencing rapid growth, fueled by advancements in AI technologies and the expansion of e-commerce, and is poised for further acceleration. We believe our technology is well-suited to this market, and we have the right product available at the right time. Currently, we have established partnerships with three impressive OEM partners in this space, and we are actively pursuing additional business development opportunities with a number of exciting prospects in our pipeline. We recently announced our entry into the airport ground equipment sector, a development that has been in progress for some time. This sector leverages system designs similar to those we've successfully implemented in the material handling space. The timing is also ideal as major airlines are actively seeking to reduce their carbon footprint in their ground operations. Our Infinity lithium-ion battery technology offers the essential reliability and safety required by this mission-critical industry. We're also excited to showcase several of our products at the upcoming GSE Expo this September. Some of the largest battery systems that we are developing are for Class 8 trucks. This is a sector that has struggled to be electrified, in part, in my opinion, due to battery technology not being ready for the task. Cycle counts are high, along with energy, power, and safety requirements. These are factors that make it difficult, particularly for standard automotive battery technologies, to be used. We partnered recently with Janus Electric, based in Australia, to develop some custom high-voltage battery systems for the U.S. and Australian markets, with our first delivery scheduled in 2026. Our partnership with Sumitomo Corporation has been responsible for multiple high-profile OEM wins in the construction and earthmoving equipment space. We are making shipments to our OEMs in Japan this quarter. These are customized battery modules that are being manufactured on an updated automated line in Mississauga. With our proven performance and technological edge, coupled with our investments in domestic manufacturing, we have identified the defense sector as a high-value growth opportunity. We are actively expanding our collaboration with a global defense contractor, showcasing our superior safety and cycle life in a mission-critical vehicle application. Our strategy includes a more aggressive pursuit of this sector, bolstered by our upcoming U.S.-based manufacturing capabilities. We are also working towards launching some specialized energy storage products later this calendar year that have been designed to leverage our technological strengths and specifically target a growing demand for domestically produced high-performance and, importantly, safe energy storage products. Investments in data centers, AI infrastructure, and an overall greater need for improved energy infrastructure are driving this demand, and we believe we can provide our solutions while maintaining the strong margins, which we have demonstrated in other verticals. Finally, we are also well underway to launching multiple recurring revenue stream products in fiscal year 2026. This includes energy services and software-based solutions. Given this, we anticipate separately itemizing these on our financial statements in fiscal year 2026. I'll now hand it over to John to review the financial results in more detail.

John Gibson, CFO

Thanks, Raj. This quarter proved to be another record-breaking quarter for the company. Q3 represents significant progress in both our financial results and operational capabilities. We are steadily strengthening the financial foundation required to drive scalable and sustainable growth. Revenue for the quarter ended June 30, 2025, was $17.1 million compared to $10.3 million in the prior year, with revenue for the 9 months ended June 30, 2025, at $43.3 million compared to $33.1 million in the prior year. Year-over-year growth of 67% for the quarter and 31% year-to-date. We have now surpassed our breakeven point of $50 million, having recorded almost $55 million over the past 12 months. We continue to prove our ability to increase our run rate effectively and efficiently. As Raj mentioned, we've already received over $65 million in purchase orders in the 9 months ending June 30. With steady order intake and our enhanced working capital capabilities, we will continue to focus on efficient execution of orders. Gross margin for the quarter was 30.8%, a slight decrease from the prior year margin, driven primarily by product mix and some increase in cost of sales. Nine-month gross margins were 30.8% for 2025 and 32.4% for 2024. Similar to the prior quarter, the company had some marginal increased costs on certain components due to tariffs. We continue to increase our production efficiency and optimization to limit or remove the impact of these increased costs. With increased production volumes, we are able to push for better pricing with our key suppliers. Management believes the company is well-positioned to maintain these strong margins throughout Q4 and into the next fiscal year. Operating profit increased significantly for both the quarter and year-to-date. Operating profit for Q3 2025 was $2 million compared to an operating loss of $0.6 million for Q3 2024. And for the 9 months ended June, it was $33.2 million compared to just $19,000 in the prior year. Our adjusted EBITDA was $2.9 million for the quarter compared to $0.6 million in the prior year, with the 9-month figure being $5.4 million for 2025 and $2.6 million for the prior year. EBITDA as a percentage of revenue was 17% for the quarter and 12.6% for the 9 months ended June. Q3 also represented our ninth consecutive quarter of positive adjusted EBITDA. The company generated a net profit of $0.9 million for Q3 2025, a significant increase from the net loss of $0.3 million in the prior year. Furthermore, the company generated a net profit for the 9 months ending June of $1.3 million compared to a net loss of $1.4 million in the prior year. We have now had 2 consecutive quarters with a net profit, which management believes is a true inflection point for the company and reaffirms our message that we can achieve continued profitability. Further revenue growth, which we have a line of sight of for the rest of the fiscal year, will further contribute to increased overall profitability. The company generated positive cash flow provided by operating activities of $5.4 million and negative changes in working capital of $13.2 million. The movement in net changes in working capital is purely an invoice timing issue at the end of the quarter. To date, we have received a significant portion of this accounts receivable balance. The company ended Q3 '25 with positive net working capital of $31.8 million compared to negative net working capital of $0.4 million for the prior year, a significant increase, and this demonstrates the continued improved financial and operational performance of the company. Management is committed to continuing this positive trend. As of June 30, 2025, total debt was $18.8 million compared to $18.4 million in the prior year. In addition to cash on hand, the company had availability within its bank facility of over $6 million. Subsequent to the end of the quarter, the execution of warrants provided a cash inflow of $3.2 million for the company. Management continues to manage cash conservatively, and through the recent financings, we have seen a reduction in the cash interest costs for both quarters and the 9 months ended June. We believe we have adequate liquidity to support our anticipated growth for the remainder of the fiscal year and into 2026. With respect to the Jamestown financing, we expect to receive the first draw from the EXIM facility in the coming days. In order to take full advantage of the payment terms of EXIM, we have funded the early, smaller payments ourselves, waiting until the first round of large payments to make the first draw. Under the credit agreement, we are able to recover all payments made relating to the project, so any payments made to suppliers will come back to us. Furthermore, with the interest-only payment portion starting 6 months after the first draw, by doing this, we have pushed the start of interest payments into 2026 and the start of principal payments into 2027. That concludes the financial overview. I'll now turn the call over to Raj for concluding remarks.

Rajshekar Das Gupta, CEO

Thank you, John. Our foremost priority and most significant historical investment is the expansion of our manufacturing capabilities in Jamestown, New York. We are actively collaborating with our strategic equipment suppliers and contractors alongside developing our internal expertise and team to guarantee the project's seamless execution. We are confident that cell production in Jamestown will commence by mid-next year as originally scheduled. Importantly, the recent One Big Beautiful Bill Act continued the 45X production tax credits, which our Jamestown output will be eligible for. This will help provide additional capital, which we did not take into account in the EXIM financing. Concurrently, we have been establishing robust supply chains, particularly those based in North America, to cater to the needs of more sensitive customers, especially within the defense sector. Years ago, we proactively avoided Chinese supply chains for this initiative, encompassing both materials and equipment. This foresight will safeguard us from future disruptions and align us with the requirements of many of our strategic customers. Electrovaya's technology continues to lead the industry in safety and cycle life, in particular. We are continuously enhancing this technology as evidenced by our recent UL2580 certifications for higher capacity battery systems, which demonstrate incremental increases in energy density. Furthermore, we are actively developing a next-generation ceramic separator for our Infinity battery products. This innovation will offer several improvements, including enhanced thermal stability, reduced costs, and decreased thickness. Our strategy involves increasing the domestic content of this crucial technology and ultimately scaling its production at our own facilities. We're collaborating with a domestic supplier of high-purity alumina, which possesses exceptional properties to achieve this goal. The Electrovaya Labs team continues its primary mission in its solid-state battery development. Encouraged by positive small cell results, we are investing in dry room facilities and additional equipment at our Mississauga labs. This expansion will enable the production of larger cells for sampling to potential customers. In closing, this quarter marked a significant milestone in our journey to becoming a leader in lithium-ion batteries for heavy-duty and mission-critical applications. Our technology stands out, clearly demonstrating the essential attributes of cycle life and safety, which are increasingly vital in a rapidly growing automated industry. Coupled with our consistently strong financial results, we are clearly progressing towards our goals. That concludes our remarks this evening. John and I would now be pleased to hold a question-and-answer session.

Operator, Operator

Your first question is coming from Daniel Magder from Raymond James.

Daniel Magder, Analyst

Congrats on the quarter. Just obviously, a lot of success in the quarter, expanding into new verticals with a number of announcements. How do you think about the change or a potential change in the revenue makeup in '26 as a result? Or are these longer-term?

Rajshekar Das Gupta, CEO

In fiscal '26, we expect significant contributions to revenue from various verticals, although it's difficult to determine the exact percentage each will account for. For example, we anticipate substantial shipments in the robotic vertical to at least one of our OEM customers starting next quarter. The battery systems in this sector are fairly uniform, allowing us to launch products more rapidly, which bodes well for growth. Similarly, airport ground equipment is poised to generate revenue quickly since the product is ready for deployment, with initial units shipping in the next week or two. We have also begun shipping to construction OEMs in Japan at a preproduction level, and we expect that to scale further in fiscal 2026. All these factors combined will contribute to overall revenue growth.

Daniel Magder, Analyst

Yes. And I guess, in terms of customer types with these new verticals, obviously, on the material handling side, discussions with Fortune 100 companies. Is it a similar makeup of the type of new customers that you're having these discussions with?

Rajshekar Das Gupta, CEO

For the most part, they're the OEMs themselves, and that's what we're focusing on. For instance, in robotics, it's the OEMs that we're talking to mostly, and the same thing with the other sectors, especially, of course, defense would be like that. It's a little bit different than the material handling space where we have direct relations with some of those major end customers. The exception to that is on the energy storage side of things, where some of those same customers have expressed interest in our energy storage products. So we will sell those same end customers batteries for their material handling vehicles. We may also sell them energy storage solutions.

Operator, Operator

Your next question is coming from Eric Stine from Craig-Hallum.

Eric Stine, Analyst

So maybe just sticking with energy storage. I noticed that you did not call that out just in your written release, but clearly a huge opportunity, especially since it is with many of your material handling customers. I mean, the fact that you did not include it, should we view that one as a little bit further out? Maybe remind us of the timing of the contribution there. And I mean, I would think it's safe to say that that vertical might be the largest of any of your emerging verticals.

Rajshekar Das Gupta, CEO

Yes. We'll be making a separate launch of that product fairly soon. So that's why we haven't put it as a separate item in our press release. But it's a product line that our engineering team has been working on for some time. We want to make sure the specifications are perfect before we launch it.

Eric Stine, Analyst

I would think that your customers have given you some indications about demand levels or deployments at some of the same locations where you are deploying your material handling solutions.

Rajshekar Das Gupta, CEO

They most certainly have. So we will make deployments in calendar year 2026, and we will make shipments next year. So it's a sector that is obviously very, very large, growing very quickly. We want to maintain our value there. We're providing a battery solution, which is much safer and longer-lasting than what you can find from competitors. Thus, we want to be able to secure strong margins, which is in that space; it's a more commoditized space in general. So we're going to be an outlier there. But we already have strong relationships with some of those large corporations, which are investing significant sums in this area.

Eric Stine, Analyst

Maybe just on the capacity addition in Mississauga. And then you combine that with Jamestown, maybe with those two steps, where your capacity stands? And then just thinking longer term, I mean, is the eventual goal to just move everything on the manufacturing side to Jamestown, with Mississauga being more of an engineering facility? Or how should we think about that?

Rajshekar Das Gupta, CEO

Yes. First of all, we've added a second shift here in Mississauga, and we've started some growing operations in Jamestown. We're taking in a fair bit more orders than we're shipping, and so we need to catch up on that. So we're scaling things. That second shift is likely going to be a permanent piece, and Jamestown is only going to continue to increase its contribution. So that's what we're doing on the capacity front in the near term. In terms of the longer-term vision that we have, Mississauga clearly has engineering development as its main priority, but we will leverage its system manufacturing as well because it's well optimized to do that. If you think about these verticals we're launching products into, a lot of them are new types of battery systems, and it makes sense to utilize Jamestown more for those verticals compared to the Mississauga site, which is well optimized to provide battery systems for the material handling space.

Eric Stine, Analyst

Last one for me. Just curious, I mean, obviously, great order momentum here throughout the fiscal year. I mean, I would assume that has continued in Q4.

Rajshekar Das Gupta, CEO

It certainly has. We haven't seen any slowdown in order intakes, especially from some of our key end customers, which are typically very large corporations. They have continued to provide us with strong order flow. We're also receiving more guidance from them on what to expect over the next year to 24 months. We are very confident in this area as it stands, and this confidence supports the investments we are making in Jamestown and other projects.

Operator, Operator

Your next question is coming from Craig Irwin from ROTH Capital Partners.

Craig Irwin, Analyst

So, Raj, a lot of investors are asking us about your participation in the robotics market. And we've been pointing them to your very early work with the e-commerce guys, I guess, one in particular that's a little bit of a pioneer here. Can you maybe help us understand the breadth of applications that you're looking at in robotics? There is some enthusiasm out there for certain applications that could really explode and see tremendous adoption over the next couple of years. For example, the Tesla humanoid, the supply chain is talking about 30 million units, which would be incredible. Can you maybe give us color on whether or not you're touching some of these applications that could see some very rapid growth over the next 5 to 10 years? And the customers you're working with, I know many of them are iterative, and they work from lower risk to higher risk opportunities. Can you maybe talk about how you would see this evolve?

Rajshekar Das Gupta, CEO

Yes, it's quite dynamic. However, all these robots have a common requirement: they need to wirelessly charge. They require batteries capable of multiple charges throughout the day since effective operation demands significant work output. Therefore, they must go through several charging cycles daily, and the batteries need to be very safe to protect this expensive equipment. We meet these criteria and are already engaged with various entities in a rapidly growing sector that is still in its early stages. Currently, most of the robots we're involved with are used for moving goods within warehouses and factory floors, but we're also seeing applications in surveillance, including defense-related uses, although we lack specific details on those. The batteries remain consistent across different applications. Humanoid robots are certainly a possibility for the future. The typical battery for these applications is about 2 to 5 kilowatt hours, which, while relatively small for us, could lead to a high volume of units, and that's what we are expecting. We're standardizing the product somewhat, and it’s receiving positive feedback in the market. We have a pipeline of partners interested in testing our technology, and we look forward to those developments. We're optimistic about this sector, as it aligns well with our technological and product capabilities. Currently, we have partnerships with two companies in the United States, one in Japan, and there are more potential partners on the horizon.

Craig Irwin, Analyst

The other market, the other end of the spectrum, Eric asked the question about energy storage, but rail, electric locomotives take huge batteries if they're going to be battery-powered for a couple of miles. And you did have some projects that were in development. Can you maybe update us on where those stand? I know there's often shifting customer priorities, but do you still expect to make some deliveries there? And is there an opportunity for customer projects to commercialize?

Rajshekar Das Gupta, CEO

Yes. Rail is one that's very sensitive to government incentives. We did have a partner there, but I think they had some government money, which disappeared. So I see it as an interesting opportunity. It works well with our battery technology at the end of the day. A hybridized rail is probably an area that is more realistic, and one where we're in discussions with one partner there, but we'll see how it goes. I think I'm more bullish. It's the same battery, after all, whether it goes into a rail vehicle or a different type of vehicle; Class 8 trucks are probably a better place.

Craig Irwin, Analyst

That's a beautiful segue to my last question. Over the last many years, you've been generally cautious about electric vehicles, electric trucks, and conservative in the amount of R&D dollars that you specifically applied to developing products for this market. This call, you're really calling that out just now and multiple times in the prepared remarks and other answers to questions. What do you think about the approach of the OEMs that are now doing electric trucks? It seems that if they're coming to Electrovaya, they're willing to pay for performance and that they understand they need that performance. Has something fundamentally changed in this market that makes it more attractive for you, while I guess, equity investors often look at this as maybe out of focus right now, given the challenges of many of the companies that raised money as SPAC mergers?

Rajshekar Das Gupta, CEO

Yes. We're cautiously optimistic about the space. I think the reason we got pulled in is precisely because of the failures of some of our competitors in the space. What we're finding is that those who have applied standard automotive batteries, scaled them up to much larger capacities and put them in these types of vehicles, have run into problems, whether they be safety or performance. That's really put a black mark on electrified Class 8 vehicles. What we provide is a battery, which can be safe in larger sizes, which can handle very high duty cycles, and that's what this market needs. I believe that there will be a market for electrified trucks, Class 8 trucks. Most certainly, it's not going to be the majority of the market. But I believe our technology, again, is the right fit for the space. We'll see how it goes. We're not putting all our eggs in this basket for certain. The development we've done for this space is really leveraging the development we've already been doing for a defense customer, which is also for large vehicles. And so that's what we're utilizing for the space.

Craig Irwin, Analyst

Well, congratulations on another positive, profitable quarter. So great progress.

Operator, Operator

Your next question is coming from Amit Dayal from H.C. Wainwright.

Amit Dayal, Analyst

Congrats on another solid quarter. With regards to the guidance, Raj, you're maintaining it at $60 million in revenues for this fiscal year. That's implying roughly a flat quarter in Q4. But the color on the call seems to be more optimistic. Just wondering, is there a reason for you to be a little conservative?

Rajshekar Das Gupta, CEO

We're going to beat that guidance. We thought about revising it and didn't necessarily see the great urgency to do so. But Q4 fiscal year '25 will be a growth quarter over fiscal year Q3.

Amit Dayal, Analyst

And then just on the same lines, now that you are potentially going to see contributions from many new verticals next year. And as long as this material handling business stays at this year's level and grows a little bit from here, I mean, what kind of growth should we be looking for? You have the balance sheet now, and you have the production facility. You can really step on the gas. So I'm just trying to see if there is any color you can provide for how growth next year could look for you guys?

Rajshekar Das Gupta, CEO

We're still evaluating that, Amit. It's changing, so it can change on a dime. What we're anticipating is that our core sector, the material handling space, will see year-over-year growth. It's the other sectors where that growth rate is still unclear because they're just a little less mature for us. By the end of the year, by the end of the calendar year, we'll have better clarity on how that's shaping up. But what we can tell you is we're going to continue growing. We're going to continue outperforming what we're doing continuously.

Amit Dayal, Analyst

On recurring revenues, Raj, is this potentially beginning in the next fiscal year or a little bit later? Just trying to understand how these products are going to be sold? Are these attached to the battery systems you're selling to customers or separately? Just trying to get a sense of what the profile of this recurring revenue segment will look like.

Rajshekar Das Gupta, CEO

Okay. So on recurring revenue, there are really two main parts to it that we're targeting. One is services associated with energy management. We already have data analytics, which we have some Fortune 100 companies buying from us, that service. And that's a relatively inexpensive service we provide. What we're launching in the fall will be an AI-driven demand response system, which will allow end customers to save on electricity without seeing any reduction in performance. That's a service we anticipate being able to generate meaningful, continuous, recurring revenue. So that's one product we'll be launching. The other, more complicated one, is our energy services product, which is directed more to those end customers who want to treat the battery as an energy service. They would prefer to pay, instead of looking at a CapEx, to utilize our technology as an OpEx. Given our technology's strength, that's very beneficial in the long run because when Electrovaya sells a battery for a warehouse application, for instance, the battery performance is so good that it takes a long time to get repeat business. That's something we're looking to leverage here with this.

Amit Dayal, Analyst

So, for this battery as a Service model, will those batteries be on your balance sheet then for the duration of those contracts?

Rajshekar Das Gupta, CEO

Potentially, that's something that still might be a special purpose vehicle with a third-party investor where we take part in the benefit, but not necessarily have it all on our shoulders there. It's something that's still being looked at. It hasn't been finalized. What I can tell you is that the profitability of this is much greater.

Operator, Operator

Your next question is coming from Jeffrey Campbell from Seaport Research.

Jeffrey Leon Campbell, Analyst

First of all, congratulations on a very strong quarter, and we appreciate the encouraging guidance for the fourth quarter as well. I wanted to start with the Janus partnership. This appears to be a swappable battery approach, if I read it correctly, and that was first pioneered in Israel years ago, and then it seems to be really gaining steam in China. So if I'm correct, do you see this swappable approach working in Australia? And you also mentioned in your remarks that there's an eye to the U.S. market with this as well. I was wondering, would that be a similar effort, maybe geared towards long-haul trucking? Or could this be something that would take advantage of distribution with any of your material handling relationship customers in the U.S?

Rajshekar Das Gupta, CEO

So Janus has this approach of swapping the batteries, which enables them to serve their customer's needs where they're going long distances and need the power immediately. If you want to do that, you need a battery which can handle very, very high utilization rates, which ours is a perfect fit. You also need batteries that are, of course, safer because you're doing a lot of movement. That's what we're supporting them with. I don't really have a strong opinion on whether swapping is good. I don't have a strong opinion on the application.

Jeffrey Leon Campbell, Analyst

Well, then just let me ask again, then. What did you mean when you said that you're working with them, but you're also in Australia and the U.S. market?

Rajshekar Das Gupta, CEO

So they already have a large number of customers in Australia, and they have customers in California. So when we deploy batteries, it will be for both markets.

Jeffrey Leon Campbell, Analyst

Can you provide an update on your leasing business? That seems to be the one that was most poised to participate in the long-term trend of lead-acid battery replacement with Infinity batteries, the last time we discussed.

Rajshekar Das Gupta, CEO

Yes, that's leasing from our OEM partner. They are taking advantage of the performance of our batteries by providing a higher residual value on the leasing. For Fortune 100 companies, they're typically not leasing these batteries. But for mid-sized to large companies, they're often looking to lease. Because the residual value of our batteries is higher, that makes the leasing through the OEMs quite attractive. That leasing program with Toyota was launched really at the start of this year. It's been very successful, and it's driving most of our orders for that brand.

Operator, Operator

Your next question is coming from Orin Hirschman from AIGH.