NanoXplore Inc.

Good day, and thank you for standing by. Welcome to NetExplorer third quarter fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Martin Gagne, Director of Investor Relations.

Please go ahead. Good morning, everyone, and welcome to Nanoexplore's fiscal 2023 third quarter conference call. Today, I'm here with Soroush Nazarpur, our President and CEO, and Pedro Azevedo, our CFO. We'll start with our prepared remarks and then a Q&A. Please note that our discussion will include estimates and other forward-looking information, which our actual results may differ from in the future. We invite you to review the questionnaire language in yesterday's earnings release and in our MD&A, regarding the various factors, assumptions, and risks that could cause our actual results to differ. With that, let me turn it over to Soroj.

Thank you, Martin. Hello, everyone, and thank you for being with us today. Good morning, everyone, and thank you for joining us today. I'm very proud of where we are as a company and the strong improvement we are delivering so far in fiscal 2023. We are having a great year and many thanks go out to incredible Nanoexplorer team for advancing our growth strategy and financial agenda. Before I begin with my prepared remarks, I would like to welcome Joseph Peter, the retired CFO of Nissan Motors Corporations, to our board. Prior to working at Nissan, he has spent 25 years at General Motors in different executive functions, including CFO of the North American and International Operations. Joseph, with his extensive automotive industry experience, brings very strong expertise and business acumen to NanoExplore. Joseph will help us access key stakeholders in the transportation industry and contribute to the success of Lanox store battery materials and light weighting composite initiatives, as well as playing a key role in Volta Explosiva factory success. I'm very happy to have Joe on our board, and his experience will be instrumental for our company as we increase our focus on electrification of transport and sustainability ecosystem. Okay, let's start with federal and provincial budgets. It's important to mention that we expect the federal and provincial budgets to have positive impact on NanoExplorer and VoltaExplorer. We are very happy with the budget, and I would like to praise both governments for their strong desire and conviction to help combat carbon emissions. The 30% refundable investment tax credit, or ITC, at the federal level is an important element of our financing of both NanoExplorer battery material facility and Volta Explores Gigafactors. The ITC derisks our projects and should help facilitate the completion of our CAPEX finances. Let's move to our third quarter results. We delivered a strong quarter on both revenue and adjusted EBITDA, driven by the strong deployment of new programs. Total revenues grew 11% to $31.6 million. and we had positive adjusted EBITDA for the second quarter in a row and the third in four quarters. Our gross margin as percentage of revenue improved significantly, and we are headed in the right direction. Pedro will discuss in more detail our financial letter later in the call. Moving to key developments that happened during the quarter, let's begin with our transportation sector. As we mentioned in our last call, one of our largest commercial OEMs approved the use of graphene for all current and potential future programs, and we are seeing this decision reflected in our performance and growth in our backlog. We see this positive approval as benefit to our graphene intake. Furthermore, we announced earlier in the quarter the extension of our commercial agreement with Martin Reja to 10 years, which is a strong validation of the benefit that our graphene black can bring and the strong relationship we have with our partner. Hasting point is this important award, Martin Rea won a prestigious 2022 PACE award for our graphene-enhanced brake lights. This is a testament to the strong performance and key benefits that our graphene brings. These include 25% weight savings while demonstrating superior strength, great abrasion, and chemical protection, and longer-lasting. In addition, our relationship is also expanding on new product offerings, as both Martenria and Nanoexplore are working on additional graphene solutions that we expect to bring to the market in the next few months and years. Switching to drilling fluid market. As we said in the past, this is a significant graphene powder content vertical, which should benefit our margins in the future. Recall that powder is our highest margin business. In recent weeks, Albeit still early in the process, we received positive results from a very large global drilling fluid company, where they saw enhanced lubricity among other improvements by increasing the graphene loading in their trials. This helps lower the coefficient of friction, which leads to process efficiency, increasing drilling speed, and lowering downtime. Based on these positive outcomes, this customer is moving forward with further testing and validation. In addition, as we said during our Q2 call, we are in commercial discussion with our specialized drilling fluid company, and the conversations are very productive and advancing very well. We are hopeful it will yield positive results in the next 12 months or so, and we are confident we will build on this strong relationship and expand our industry footprint in the future. In insulation foam, our commercial dialogue is progressing very well. And we are in the final stretch of negotiation with this well-known global chemical company that we discussed in Q2 call. We are there. We are confident that we will win and expand within this organization. Let's switch gears to discuss our five-year plan. Nanoexplore is a big advocate of the energy transition and our battery material lightweighting in our graphene-enhanced lithium-ion battery manufacturing venture. Volta Explore is a strong evidence of that. Let's begin with our 12,000-tonne battery material facility. As a result of the government budget, we decided to include the future 4,000 metric tonne per year graphene facility to this anode material facility and increase the total capacity to 16,000 metric tonne per year in one facility. This will help us to benefit nearly $50 million from investment tax credit, which is around 40% of total CAPEX requirements. Even though we are waiting to receive the final details of ITC, we recognize that the program begins in 2024, and accordingly, we have decided to push our CAPEX into calendar 2024. Moreover, we're actively working to secure customers for the anode material facility prior to the investment. Moving to our lightweight and composite business, but more specifically, our graphene SMC proprietary solution, Our timeframe is still within our guidelines and we should commission the plant in late calendar 2024 and begin production in early 2025. Further, our detailed engineering work is advancing well and following our due diligence work with our potential suppliers, we are at the stage where we will start issuing purchase orders in the next couple of months for long lead time equipment. As we have said in the past, light weighting will be key in energy transition and we are confident that our graphic battery compound will be crucial as we can reduce part weight by up to 25% relative to other non-graphene SMC composites parts. The most important component of an electric vehicle is the battery pack, but it's also the heaviest. Therefore, reducing the weight is of utmost importance to improve driving distance, and we're confident that we have the product to solve this weight issue. As an empty metallic battery enclosure can weigh up to 160 kilograms, and adding cells to the modules, it could represent up to 30% of the entire weight of the vehicle. We believe it's a very attractive market for NanoExplorer due to a much larger graphene content, which can be up to five times more, the larger market size, and potential market penetration of composite materials. According to a December 2022 research and market report, the battery enclosure industry is a U.S. $4.1 billion market, growing to U.S. $11.7 billion by 2031. Finally, let's discuss Volta Explore. We announced a $10 million purchase of Martin Rea's stake in Volta Explore back in March, and we have now 100% of the company. The rationale behind the deal was to simplify the capital structure and have access to additional financing opportunities. We came to this decision because the joint venture has served its purpose and they were successful at building demonstration facility and testing ourselves. We would like to thank Martin Rea for all their support they have provided us throughout this collaboration. Martin Rea will continue to support NanoExplore and as a result of this transaction, Martin Rea received 3.4 million shares of NanoExplore and now owns 38.5 million shares or close to 23% of Narrow Explore. As I said earlier, Volta Explore qualifies to receive the refundable investment tax credit that the federal government announced in March, and together with the provincial support, we anticipate nearly 50% of total capex of Volta Explore Gigafactory to be provided by the government. We are very happy with the extent of government support, and even though it took longer than expected, the incentive package is highly competitive with what's being offered in U.S. through Inflation Reduction Act. In terms of capital expenditure for construction of Vigo Factory, the first block of capital will be spent by summer of 2024, and we're currently working to sort out the remaining equity and debt components. Once the financing is complete, we'll provide more colors and data points to facilitate the financial modeling of Voltax Blue. Moreover, we began the retooling process at our demonstration plant to move to 21700 cells format from 18650, which is the industry standard and will be dominant cells for the next several years. We should start producing these batteries in the second half of this calendar year. To conclude, we expect to start building the Gigafactory in calendar 2024 and commission it in calendar 2026. With that, I will pass the line to Pedro, where he will discuss the financials and our outlook.