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Exro Technologies Is A Disruptor In The Electric Motor Industry (OTCMKTS:EXROF)

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Exro Applied sciences Is A Disruptor In The Electrical Motor Trade (OTCMKTS:EXROF)

Exro Applied sciences (OTCQB:EXROF) [CSX:XRO] is a clear tech designer of personalized electrical engine controllers. The corporate’s coil driver technology permits for seamless actual time switching between excessive torque/low velocity and excessive velocity/low torque configurations to maximise effectivity.

Exro didn’t invent coil driver know-how, however they’re the primary to unravel the way to apply it to permit motors to take care of even torque and energy manufacturing whatever the problem. A straightforward option to perceive the issue that Exro solves is to consider how your automobile engine loses energy going up a steep hill. Exro know-how seamlessly switches torque and energy demand as required by the motive force with out sacrificing one for the opposite.

The corporate gives a first-of-its-kind patented answer which reduces power demand and manufacturing prices by eliminating the necessity for a gearbox or for duplicate energy sources. In distinction, Tesla’s (NASDAQ:TSLA) answer on their mannequin 3 is two onboard motors, whereas Porsche makes use of two gear boxes.

Two completely different coil configurations.

Supply: Engineering.com courtesy of Exro

I’m very optimistic about this firm as Exro has an enormous addressable market with a know-how that may be utilized to something that has an electrical motor. Exro is within the early levels of commercialization and has a brand new administration group, a beefed-up Board of Administrators, 8 partnerships with industrial stage readiness firms, and a brand new set of business prospects able to be exploited and a marketing strategy that can enable the corporate to function on a excessive margin, low value foundation whereas it shortly scales. Please word that, though this firm is predicated in Canada, all financial figures on this article are in U.S. {dollars}.

Firm Origin

Exro founder Jonathan Ritchey was on a household trip at a distant cabin powered by a loud generator that was conserving his household awake at evening. Because the household would use much less energy whereas asleep, Ritchey thought if he might flip the facility decrease, the machine would make much less noise, however he discovered no method to decrease the facility. Doing his analysis, he realized that turbines have at all times been made with one energy setting and no changes.

Ritchey designed a small generator utilizing coil driver know-how, permitting for a number of configurations and took his design to a clear know-how fund. He obtained funding which he used to create an organization that might finally change into Exro.

Technique

A couple of yr in the past, the corporate introduced in a brand new CEO, Sue Ozdemir, previously the CEO of GE’s Small Industrial Motors division, to develop and implement a commercialization technique. Ms. Ozdemir visualized the huge alternative that Exro has and determined to initially give attention to one theme. As a substitute of pursuing making use of the know-how to all the things from blenders to hoover cleaners, she has focused electrical mobility functions which embrace vehicles, vehicles, busses, bicycles, bikes, boats, trains, and farm automobiles.

The corporate has eight partnership initiatives in varied levels of improvement. Every collaboration will lead to a personalized prototype for every respective companion, which is able to subsequently bear area testing to function proof of idea after which industrial stage. Manufacturing might be carried out or outsourced by every celebration. Exro will obtain royalty funds based mostly on items bought and search so as to add companions as every mobility utility reaches industrial stage.

The corporate technique additionally contains R&D to develop new alternatives to observe the present emphasis on mobility corresponding to making use of their know-how to windmills, batteries, HVACs and wind generators and maybe utilizing elevators to provide power on their method down. I requested CEO Ozdemir in a current dialog how quickly we will anticipate to see the corporate broaden into these new areas. She replied,

“Our plan is to remain targeted on the initiatives with our eight companions earlier than we start pursuing different alternatives. We’ll most likely add one new companion in 2021 and perhaps others if the fitting alternative presents itself.”

Having efficiently accomplished proof of idea for e-motorcycles with Motorino, the corporate has escalated its gross sales efforts to different e-motorcycle firms, and I admire how meticulously Ms. Ozdemir is making use of consideration to getting issues proper earlier than tackling new frontiers.

Guideposts

Earlier than Exro can obtain gross sales, they need to efficiently full pilot testing for every one in every of their chain drivers that are in several sizes with a purpose to serve completely different mobility functions. The smallest chain driver is prepared for industrial gross sales for scooters and e-bikes. The 100 v chain driver for vehicles, bikes, and lightweight vehicles is in prototype stage, having not too long ago efficiently completed pilot testing. In line with the investor presentation, two bigger chain drivers might be out there within the second half of 2021 for buses, vehicles, and industrial automobiles. Thus far, the corporate has delivered on projected time targets regardless of the pandemic.

Initiatives

AssociateProductDate InitiatedStanding
Motorino ElectricalbikeSept. 2019Commercialization 2021
PotenciaautomotiveSept. 2019Prototype – industrial anticipated 2021
Templarboat taxiNov. 2019Prototype anticipated 2021 – attainable industrial 2021
AurorasnowmobileFeb. 2020Prototype and subsequent industrial anticipated 2021
Clear Seed CapitalagricultureApril 2020Prototype anticipated 2H 2021
ZerobikeJune 2020Prototype anticipated 1Q 2021- attainable industrial 2021
Sea ElectricalfleetJuly 2020Prototype anticipated 2H 2021
Heinzmannmotor oemSept. 2020No timeline given

Supply: Investor Presentation data

The Exro collaboration with Motorino resulted in an total performance increase of over 20% and as a lot as 50% in climbing situations. Try this video. The founder and CEO of Motorino, Steve Miloshev said:

The Exro bike was noticeably extra superior going up the hills particularly, it sustained constant excessive torque and velocity instantly from the beginning all the best way to the highest of the hills. Our customary electrical bikes had been no match for it in a race by means of Vancouver.

Motorino e-bike retrofitted with Exro technology. (Image courtesy of Exro.)

The Motorino e-bike with Exro know-how.

Supply: Engineering.com

It took a few yr and a half for Exro to go from improvement by means of testing and to be prepared for industrial stage with Motorino. Developments at Potencia are taking a bit of bit longer as there was a delay because of provide chain points with China. Profitable testing of the prototype will result in Potencia changing Mexico Metropolis’s 250K taxis with fuel motors to electrical motors geared up with Exro’s know-how.

The partnership with Potencia has potential for extra phases past vehicles corresponding to windmills and perhaps electrical trains, however not till the mobility initiatives are absolutely ramped up.

Exro not too long ago started a collaboration with Traktionssysteme Austria to combine their traction motor system for giant vehicles with Exro’s coil driver know-how. Traktionssysteme has a world footprint and opens up new gross sales alternatives for Exro.

The corporate has utilized its coil switching know-how to develop AI-enhanced software program for lithium ion battery cell managing named Clever Battery Administration System (“IBMS”). IBMS controls the circulate of power implementing algorithms to maximise efficiency and improve battery life. Exro plans on starting pilot testing of IBMS in early 2021.

Addressable Market

Exro has an virtually limitless whole addressable market as soon as it begins to broaden past mobility functions, which is a reasonably large sized market all by itself. In line with the corporate’s investor presentation, the market demand for micro mobility functions is anticipated to develop at a CAGR of 8.23% to $19 billion by 2025 within the U.S. alone. Micro mobility contains electrical scooters and electrical bikes. Driving gross sales are automotive site visitors congestion and questions of safety ensuing from the pandemic as commuters search to keep away from public transportation.

The International Snow Machine Manufacturing Association cites the worldwide snowmobile market to be price near $40 billion. EV gross sales have been rising at 40% charge in accordance with this study, whereas e-boat gross sales are anticipated to develop at a fair quicker pace.

Competitors

Exro competes in opposition to firms that overhaul motors or add secondary motors or two crankshafts to perform related outcomes. Exro’s know-how permits for the elimination of the crankshaft, creating extra space and lowering weight and is a less expensive various than engine overhauling. It is attainable that another person will determine the way to resolve the torque/energy downside, however Exro will at all times have the primary mover benefit.

Administration Workforce

CEO Sue Ozdemir is effectively revered within the electrical engine business as the previous CEO of GE’s Small Industrial Motors division the place she was approached by many start-ups to go their respective firms. Forbes journal revealed an article by Brant Pinvidic on EXRO as an fascinating firm made much more enticing by its new CEO:

She mentioned, “Present me the know-how.” They did. Thirty days later, Sue had resigned her place at GE, moved her complete household to Calgary Alberta, and have become the CEO of EXRO. My first query was, “Why would you permit Common Electrical to run this firm?” She mentioned, “Are you aware something about electrical motors?” “No,” I responded. “Properly, I do,” she smiled. “I had no selection.” And similar to that, Sue was a ‘compelled entrepreneur’ thrust into her first true entrepreneurial endeavor. And the enterprise of Exro grew to become infinitely extra fascinating.

Interview with Exro CEO Sue Ozdemir Supply: Forbes article

Within the brief time of her tenure, Ms. Ozdemir has formed the corporate technique, set a objective to determine 8 partnerships, and achieved it. She additionally reshaped a lot of the administration group.

CFO John Meekison has over 20 years’ expertise as a CFO and is ideally suited to a start-up firm with 15 years’ expertise in elevating capital. His tenure with the corporate precedes CEO Ozdemir’s.

Members of the administration group to hitch the corporate subsequent to the hiring of Ms. Ozdemir embrace:

  • Chief Business Officer Josh Sobel – 10 years of expertise as a gross sales chief at GE and Siemens. Mr. Sobel manages all of Exro’s industrial partnership alternatives.
  • Chief Engineer Eric Hustedt – Over 20 years of expertise in automotive inverter design.
  • Chief Advertising and marketing Officer Richard Meaux – Held varied management positions at GE in gross sales, engineering and product administration resulting in turning into Director of Advertising and marketing and Digital Operations for GE industrial Motors previous to becoming a member of the Exro group.
  • Chief Merchandise Supervisor Steven Moon – Adds superior digital and software program data.

Board of Administrators and Advisory Board

Co-Chairman Mark Godsy was the unique Exro CEO. He’s a lawyer who’s described in lots of locations as a serial entrepreneur because of his success. Mr. Godsy co-founded two multi-billion-dollar biotech firms; ID Biomedical and Angiotech Prescription drugs.

Ms. Ozdemir has beefed up the Board of Administrators by including esteemed individuals, together with former GE, Siemens, and Ford workers. Members of the board added since Ms. Ozdemir took the helm are:

  • Darryl Wilson – 26 years of expertise serving GE in Europe, China, and Houston earlier than retiring as VP of GE Business Energy.
  • Gary Mar – Adds expertise in authorities and can counsel Exro in its efforts to assist Web Zero Initiatives.
  • Werner Kitz – Over 25 years’ expertise in administration and engineering at Siemens.
  • Viorel Nica – Currently the Companies Enterprise Director for Schneider Canada. He has huge expertise within the commercialization of electrical motor functions after working for GE and Siemens for a mixed 26 years.
  • Julie Wurmlinger – Joined the board in Sept. She retired from her function as International Chief Engineer from Ford Motor Co. and is the present President and Proprietor of OhmTek.

Financials

Shares Excellent102.9 Million
Choices11.1 Million
Warrants2.8 Million
Totally Diluted116.7 Million
Market Cap$350 Million
Money$3 Million
Enterprise Worth$347 Million
Insider Possession8%

Supply: Investor Presentation

Exro reported $1.4 million in money as of June thirtieth, with debt at $.4 million. The corporate raised $6 million in July from a share and warrant providing. They burn about $7million per yr. The amount of money on the above desk is simply an estimate. The warrants have a strike value of $.69 and are within the cash because of sharp rise in Exro’s share value.

The corporate simply issued a press release indicating they’ll do a capital increase in early Dec. Particulars on the capital increase haven’t but been supplied. This motion will possible create promoting stress and alternative for long-term traders to determine a place in addition to so as to add shares for earlier traders. The timing of the capital increase is sensible since financing might be wanted earlier than the corporate turns into worthwhile in 2023, and one of the best time to do a capital increase from the corporate’s perspective is when the inventory is hitting new highs as is at present the scenario.

It is a start-up firm that’s simply coming into industrial stage. The overall addressable market is gigantic. I requested Ms. Ozdemir for assist in sizing up what 2021 would seem like so far as revenues. She mentioned that gross sales with Motorino will begin this quarter and can begin on just some e-bikes being geared up with the Exro know-how and that she expects that the opposite companions can even introduce Exro know-how equally. There is no such thing as a public data on what share of gross sales Exro will obtain from their companions, and I think about that the speed is prone to enhance as Exro gross sales enhance.

There isn’t any option to guess how new many e-motorcycle companions they’ll win. The one steering on revenues that administration has supplied is that they anticipate to EBITDA optimistic in 2023. That will require income of about $7 million, which leads to an EV to gross sales a number of of simply 2X. Curiously, I requested Ms. Ozdemir what she considered Exro’s inventory value escalating 1500% over the previous yr. She did not hesitate to say that, for a very long time, the inventory has been undervalued. I feel $7 million in income for fiscal 2023 might be topped by a large margin and agree that the inventory value has been undervalued relative to the expansion potential.

Dangers

Exro is within the early levels of commercialization and is introducing a brand new know-how. It stays to be seen how the market responds. The enterprise mannequin depends on gross sales success by Exro’s companions. The corporate’s provide chain could also be in danger from the Chinese language – American commerce conflict. The corporate depends on its skill to guard and defend their 17 patents. (There are 18 patents pending.) It is a microcap inventory buying and selling on the OTC which has much less SEC reporting necessities than bigger cap shares in addition to increased spreads between the bid and ask. Extra capital raises could also be essential to fund the corporate which is able to lead to earnings dilution.

Conclusions

Exro gives a singular product that improves electrical motor efficiency whereas reducing prices. The brand new CEO has targeted the corporate within the mobility utility area from which the corporate has established eight outstanding companions. One partnership is on the cusp of business stage with others not far behind. Exro’s plan will enable the corporate to shortly scale. Because the companions will bear manufacturing accountability, Exro could have a low capex load leading to excessive margins.

Exro has plans to broaden its know-how into different markets corresponding to windmill turbines, battery know-how, electrical trains, HVACs and elevators however not till the present initiatives are absolutely developed. The corporate has a supercharged administration group and Board of Administrators to make all of this occur.

Disclosure: I’m/we’re lengthy EXROF. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (aside from from In search of Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

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