Exro Technologies Is A Disruptor In The Electric Motor Industry
- Exro offers a one of a kind solution that improves electric engine performance and lowers costs.
- The company has focused its attention on capturing mobility applications by partnering with eight companies that are leaders in their respective mobility fields.
- One of the partner agreements is now about to translate into commercial stage with others close behind.
- The company's business plan sets the stage for high margin revenue due to low capex.
- There's been a major upgrade in the company management and board of directors.
Exro Technologies (OTCQB:EXROF) [TSX:EXRO] is a clean tech designer of customized electric engine controllers. The company's coil driver technology allows for seamless real time switching between high torque/low speed and high speed/low torque configurations to maximize efficiency.
Exro did not invent coil switching technology, but they are the first to develop coil drivers solving how to apply the technology to allow motors to maintain even torque and power production regardless of the challenge. An easy way to understand the problem that Exro solves is to think about how your car engine loses power going up a steep hill. Exro technology seamlessly switches torque and power demand as required by the driver without sacrificing one for the other.
The company offers a first-of-its-kind patented solution which reduces energy demand and manufacturing costs by eliminating the need for a gearbox or for duplicate power sources. In contrast, Tesla's (TSLA) solution on their model 3 is two onboard motors, while Porsche utilizes two gear boxes.
Two different coil configurations.
Source: Engineering.com courtesy of Exro
I am very optimistic about this company as Exro has a huge addressable market with a technology that can be applied to anything that has an electric motor. Exro is in the early stages of commercialization and has a new management team, a beefed-up Board of Directors, 8 partnerships with commercial stage readiness companies, and a new set of commercial prospects ready to be exploited and a business plan that will allow the company to operate on a high margin, low cost basis while it quickly scales. Please note that, although this company is based in Canada, all monetary figures in this article are in U.S. dollars.
Exro founder Jonathan Ritchey was on a family vacation at a remote cabin powered by a noisy generator that was keeping his family awake at night. Since the family would use less power while asleep, Ritchey thought if he could turn the power lower, the machine would make less noise, but he found no manner to lower the power. Doing his research, he learned that generators have always been made with one power setting and no adjustments.
Ritchey designed a small generator using coil driver technology, allowing for multiple configurations and took his design to a clean technology fund. He received funding which he used to create a company that would eventually become Exro.
About a year ago, the company brought in a new CEO, Sue Ozdemir, formerly the CEO of GE's Small Industrial Motors division, to develop and implement a commercialization strategy. Ms. Ozdemir visualized the vast opportunity that Exro has and decided to initially focus on one theme. Instead of pursuing applying the technology to everything from blenders to vacuum cleaners, she has targeted electric mobility applications which include automobiles, trucks, busses, bicycles, motorcycles, boats, trains, and farm vehicles.
The company has eight partnership projects in various stages of development. Each collaboration will result in a customized prototype for each respective partner, which will subsequently undergo field testing to serve as proof of concept and then commercial stage. Production will be conducted or outsourced by each party. Exro will receive royalty payments based on units sold and seek to add partners as each mobility application reaches commercial stage.
The company strategy also includes R&D to develop new opportunities to follow the current emphasis on mobility such as applying their technology to windmills, batteries, HVACs and wind turbines and perhaps using elevators to produce energy on their way down. I asked CEO Ozdemir in a recent conversation how soon we can expect to see the company expand into these new areas. She replied,
"Our plan is to stay focused on the projects with our eight partners before we begin pursuing other opportunities. We will probably add one new partner in 2021 and maybe others if the right opportunity presents itself."
Having successfully completed proof of concept for e-motorcycles with Motorino, the company has escalated its sales efforts to other e-motorcycle companies, and I appreciate how meticulously Ms. Ozdemir is applying attention to getting things right before tackling new frontiers.
Before Exro can achieve sales, they have to successfully complete pilot testing for each one of their chain drivers which are in different sizes in order to serve different mobility applications. The smallest chain driver is ready for commercial sales for scooters and e-bikes. The 100 v chain driver for automobiles, motorcycles, and light trucks is in prototype stage, having recently successfully completed pilot testing. According to the investor presentation, two larger chain drivers will be available in the second half of 2021 for buses, trucks, and industrial vehicles. So far, the company has delivered on projected time goals despite the pandemic.
|Motorino Electric||motorcycle||Sept. 2019||Commercialization 2021|
|Potencia||automotive||Sept. 2019||Prototype - commercial expected 2021|
|Templar||boat taxi||Nov. 2019||Prototype expected 2021 - possible commercial 2021|
|Aurora||snowmobile||Feb. 2020||Prototype and subsequent commercial expected 2021|
|Clean Seed Capital||agriculture||April 2020||Prototype expected 2H 2021|
|Zero||motorcycle||June 2020||Prototype expected 1Q 2021- possible commercial 2021|
|Sea Electric||fleet||July 2020||Prototype expected 2H 2021|
|Heinzmann||motor oem||Sept. 2020||No timeline given|
Source: Investor Presentation information
The Exro collaboration with Motorino resulted in an overall performance increase of over 20% and as much as 50% in climbing conditions. Check out this video. The founder and CEO of Motorino, Steve Miloshev said:
The Exro bike was noticeably more advanced going up the hills specifically, it sustained consistent high torque and speed immediately from the start all the way to the top of the hills. Our standard electric bikes were no match for it in a race through Vancouver.
The Motorino e-bike with Exro technology.
It took about a year and a half for Exro to go from development through testing and to be ready for commercial stage with Motorino. Developments at Potencia are taking a little bit longer as there was a delay due to supply chain issues with China. Successful testing of the prototype will lead to Potencia converting Mexico City's 250K taxis with gas motors to electric motors equipped with Exro's technology.
The partnership with Potencia has potential for additional phases beyond automobiles such as windmills and maybe electric trains, but not until the mobility projects are fully ramped up.
Exro recently began a collaboration with Traktionssysteme Austria to integrate their traction motor system for large trucks with Exro's coil driver technology. Traktionssysteme has a global footprint and opens up new sales opportunities for Exro.
The company has applied its coil switching technology to develop AI-enhanced software for lithium ion battery cell managing named Intelligent Battery Management System ("IBMS"). IBMS controls the flow of energy implementing algorithms to maximize performance and enhance battery life. Exro plans on beginning pilot testing of IBMS in early 2021.
Exro has an almost unlimited total addressable market once it begins to expand beyond mobility applications, which is a fairly large sized market all by itself. According to the company's investor presentation, the market demand for micro mobility applications is expected to grow at a CAGR of 8.23% to $19 billion by 2025 in the U.S. alone. Micro mobility includes electric scooters and electric bikes. Driving sales are automotive traffic congestion and safety issues resulting from the pandemic as commuters seek to avoid public transportation.
The International Snow Machine Manufacturing Association cites the global snowmobile market to be worth close to $40 billion. EV sales have been growing at 40% rate according to this study, while e-boat sales are expected to grow at an even faster pace.
Exro competes against companies that overhaul motors or add secondary motors or two crankshafts to accomplish similar results. Exro's technology allows for the removal of the crankshaft, creating more space and reducing weight and is a much cheaper alternative than engine overhauling. It's possible that someone else will figure out how to solve the torque/power problem, but Exro will always have the first mover advantage.
CEO Sue Ozdemir is well respected in the electric engine industry as the former CEO of GE's Small Industrial Motors division where she was approached by many start-ups to head their respective companies. Forbes magazine published an article by Brant Pinvidic on EXRO as an interesting company made even more attractive by its new CEO:
She said, “Show me the technology.” They did. Thirty days later, Sue had resigned her position at GE, moved her entire family to Calgary Alberta, and became the CEO of EXRO. My first question was, “Why would you leave General Electric to run this company?” She said, “Do you know anything about electric motors?” “No,” I responded. “Well, I do,” she smiled. “I had no choice.” And just like that, Sue was a ‘compelled entrepreneur’ thrust into her first true entrepreneurial endeavor. And the business of Exro became infinitely more interesting.
In the short time of her tenure, Ms. Ozdemir has shaped the company strategy, set a goal to establish 8 partnerships, and accomplished it. She also reshaped much of the management team.
CFO John Meekison has over 20 years' experience as a CFO and is ideally suited for a start-up company with 15 years' experience in raising capital. His tenure with the company precedes CEO Ozdemir's.
Members of the management team to join the company subsequent to the hiring of Ms. Ozdemir include:
- Chief Commercial Officer Josh Sobel - 10 years of experience as a sales leader at GE and Siemens. Mr. Sobel manages all of Exro's commercial partnership opportunities.
- Chief Engineer Eric Hustedt - Over 20 years of experience in automotive inverter design.
- Chief Marketing Officer Richard Meaux - Held various leadership positions at GE in sales, engineering and product management leading to becoming Director of Marketing and Digital Operations for GE industrial Motors prior to joining the Exro team.
Board of Directors and Advisory Board
Co-Chairman Mark Godsy was the original Exro CEO. He is a lawyer who is described in many places as a serial entrepreneur due to his success. Mr. Godsy co-founded two multi-billion-dollar biotech companies; ID Biomedical and Angiotech Pharmaceuticals.
Ms. Ozdemir has beefed up the Board of Directors by adding esteemed people, including former GE, Siemens, and Ford employees. Members of the board added since Ms. Ozdemir took the helm are:
- Darryl Wilson - 26 years of experience serving GE in Europe, China, and Houston before retiring as VP of GE Commercial Power.
- Gary Mar - Adds experience in government and will counsel Exro in its efforts to support Net Zero Initiatives.
- Werner Kitz - Over 25 years' experience in management and engineering at Siemens.
- Viorel Nica - Currently the Services Business Director for Schneider Canada. He has vast experience in the commercialization of electric motor applications after working for GE and Siemens for a combined 26 years.
- Julie Wurmlinger - Joined the board in Sept. She retired from her role as Global Chief Engineer from Ford Motor Co. and is the current President and Owner of OhmTek.
|Shares Outstanding||102.9 Million|
|Fully Diluted||116.7 Million|
|Market Cap||$350 Million|
|Enterprise Value||$347 Million|
Source: Investor Presentation
Exro reported $1.4 million in cash as of June 30th, with debt at $.4 million. The company raised $6 million in July from a share and warrant offering. They burn about $7million per year. The amount of cash on the above table is just an estimate. The warrants have a strike price of $.69 and are in the money due to sharp rise in Exro's share price.
The company just issued a press release indicating they will do a capital raise in early Dec. Details on the capital raise have not yet been provided. This action will likely create selling pressure and a good opportunity for long-term investors to establish a position as well as to add shares for previous investors. The timing of the capital raise makes sense since financing will be needed before the company becomes profitable in 2023, and the best time to do a capital raise from the company's point of view is when the stock is hitting new highs as is currently the situation.
This is a start-up company that is just entering commercial stage. The total addressable market is enormous. I asked Ms. Ozdemir for help in sizing up what 2021 would look like as far as revenues. She said that sales with Motorino will commence this quarter and will start on just a few e-bikes being equipped with the Exro technology and that she expects that the other partners will also introduce Exro technology similarly. There is no public information on what percentage of sales Exro will receive from their partners, and I imagine that the rate is likely to increase as Exro sales increase.
There's no way to guess how new many e-motorcycle partners they will win. The only guidance on revenues that management has provided is that they expect to EBITDA positive in 2023. That would require revenue of about $7 million. Interestingly, I asked Ms. Ozdemir what she thought of Exro's stock price escalating 1500% over the past year. She didn't hesitate to say that, for a long time, the stock has been undervalued. I think $7 million in revenue for fiscal 2023 will be topped by a wide margin and agree that the stock price has been undervalued relative to the growth potential.
Exro is in the early stages of commercialization and is introducing a new technology. It remains to be seen how the market responds. The business model is dependent on sales success by Exro's partners. The company's supply chain may be at risk from the Chinese - American trade war. The company is dependent on its ability to protect and defend their 17 patents. (There are 18 patents pending.) This is a microcap stock trading on the OTC which has less SEC reporting requirements than larger cap stocks as well as higher spreads between the bid and ask. Additional capital raises may be necessary to fund the company which will result in earnings dilution.
Exro offers a unique product that improves electric motor performance while lowering costs. The new CEO has focused the company in the mobility application space from which the company has established eight prominent partners. One partnership is on the cusp of commercial stage with others not far behind. Exro's plan will allow the company to quickly scale. Since the partners will bear production responsibility, Exro will have a low capex load resulting in high margins.
Exro has plans to expand its technology into other markets such as windmill generators, battery technology, electric trains, HVACs and elevators but not until the current projects are fully developed. The company has a supercharged management team and Board of Directors to make all of this happen.
This article was written by
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