Exro at SEMA Show 2022

TRANSCRIPT

Darrell Bishop: Sue Ozdemir, our trusted and faithful CEO. And we're very excited to be doing our latest live for you guys. We've been talking about continuing our transparency and updating shareholders, giving you today what's a look inside. Sort of a 10-to-15-minute walk around, what we're doing here, why we're here at SEMA. This is our fourth iteration now of these live webcasts for shareholders and to really give you an idea of what we do on a day-to-day basis. Obviously, we don't come to SEMA shows on a day-to-day basis but just a brief look into what we do and why we're here. We'll follow up later this month with a more in-depth review in Calgary. You'll have the team in Calgary again for one of our longer sessions. But today we just wanted to give you an update, show you around SEMA a little bit. For anyone that doesn't know SEMA, SEMA is one of the largest automotive parts and manufacturing trade shows in the world. Anyone that's a car person will know this is the scene for big reveals. This is where a lot of new product gets rolled out and it is amazing. There's 125,000 people that are registered for this event and Exro-we're standing out. We're standing out in the crowd. And there's a lot of reasons why we're here. That's why we wanted to walk through that with you guys today, show you around our booth, show you what makes us unique and different and compelling both from a product as well as an investment strategy. And yeah, Sue, why are we here at SEMA?

Sue Ozdemir: So, it's been a common question for me over the last week. So, first of all, thank you for joining us for those that are joining us live. I want to remind everybody once again that this is a live update. We are live at the SEMA show which is a loud performance show, so if the quality of the sound or anything like that is a little hard it's because that is truly what we're experiencing here live on the show floor. And so, we really-our hope with the live updates is a combination of formal and informals. This is one of our informals. As Darrell said, later this month we'll do a formal update the last week of November. But these informals are really about showing you what our team is doing every day and why we're so passionate about our future and why we know that our future is really bright. And SEMA's just a small piece of our core business, but it's been super exciting to see the trends in electrification, to see what people are thinking-our actual end users. What are people thinking about electrification? And you see these monster trucks, and then you see our electric Humvee, and we have people coming to our booth just to see our Humvee. And we're building brand, we're building eyes on our stock, and we're close with our customers as we're sitting here.

Darrell Bishop: It's really amazing to see the diversity that's around here. Anyone that's followed SEMA for a long time is typically hot rods, big power vehicles, but now we're seeing electrification start to come to the forefront. And even the automotive manufacturers. We're right beside Volkswagen. This is not just about us coming for product. There's actually a lot of strategic conversations that we're having here while we're at the event. There's more than just people walking around seeing cool product.

Sue Ozdemir: Yeah, absolutely. So, Darrell and I have a combination of meetings with investment banks. There's a big investor circle that comes out to shows like this. But it's also a strategic partnership as we talk to customers, we have meetings throughout yesterday and today, and then there's just, like I said, that end user, that person that we want to go out and influence and say "Hey, why doesn't my vehicle have Exro inside?" And so, it's a really great way to get close to the community, to get close to our team. And it's a great way for us to spend time. And as the CEO of the company, I have a lot of priorities that I'm doing each and every single day but taking a couple of hours to come out and spend it and be part of our brand building is definitely part of being the CEO and building this company.

Darrell Bishop: Yeah. And so, we are live. We're completely unscripted. Sue and I sat at the table about five minutes ago. We were like, "okay, what are we going to talk about?" And predominantly we're here for Exro Vehicle Systems this week. And really showcasing what all of our products do, the integration of those products, and we have a bit of an announcement to make with respect to that.

Sue Ozdemir: Yeah. So, there's no new product announcement that we're launching today but what it really is about is talking more about what the EVS brings to the Exro corporate. So, really through the EVS division what we can do is what I call a product pull. So we can take those core products that you've all supported us in building and getting to where we are today with our Coil Driver and our Cell Driver, and we can put them into a kit that allows us to have an aftermarket solution that is able to be done through service shops, that's able to be done through large distribution shops, that really gives us another avenue while not diluting from our core business. There's no additional research here, there's no additional resources here, there's no additional capex here or opex. This is just about another revenue stream and really supporting what I've said for the past three and a half years. One of our biggest value propositions as Exro is our ability to be flexible and scalable. And that means that we can serve a lot of different markets. We can amplify our future revenues easily through the same core products. I'm going to show you just what that means as Darrell and I walk around.

Darrell Bishop: Yeah. Come with us.

Sue Ozdemir: All right. So, it is a busy show. So, there is actually people all over the show as we're talking, so I'm going to kind of bud my way into this right here. I'm going to push you guys out of the way for a minute.

Darrell Bishop: We're live.

Sue Ozdemir: We're live. And I'm going to talk to you a little bit. You can see Brian's hosting one of our potential clients right now. This is a Coil Driver like you all know, like you all love. This is our core product. Nothing's changed from our core strategy. This is still a Tier 1, Tier 2 auto OEM product that we want to stay focused on, that we are focused on. Nothing's changed there. But we've pulled this product into an actual aftermarket kit. Not just for hot rods and classic cars but for upfitters, for truck manufacturers that need to get to market fast, that need trucks on the road today but just an inverter isn't enough. So, we've teamed it up with a motor, we've teamed it up with a VCU. And now with Brian and the EVS division you can do all that integration and system work. So, essentially you can come to us as a one stop for your vehicle needs. This is for Tier 1, Tier 2 OEM. This is for upfitter network. This isn't for the general consumer yet. You can't just send me an email and say I want to buy a kit. That's not our market, never has been, it won't be. But definitely there'll be another area where you can upfit a vehicle through an approved authorized shop to purchase our kits.

Darrell Bishop: Yeah. And that's really where the kits came from, is we did this, we took products, we took our Zero Motorcycle-we'll walk around and show you-we took a military Humvee that was diesel and we converted it to electric. Do you know how many groups out there are trying to do it? We've had so many groups even before our live stream, guys came up and said, "we're trying to do this." We've done it. And we've had so much interest that we decided, hey we can sell these products. And the differentiating factor in our products is this. It is all about performance. It is all about efficiency. And that is what our system does. We stand out from the crowd. Like, full disclosure, I broke the Humvee three weeks ago, so we had to fix it up to get here. I broke it because our Coil Driver is so powerful, I took it sideways and broke...

Sue Ozdemir: Apparently, you can't do wheelies in a Humvee with a Coil Driver. Luckily, we have a really brilliant team who fixed it up and got it. We're going to show it to you. So, as you look at this Coil Driver here on the table, this shows progress. And again, as we talk live-so as you look at the one in the Humvee, it's big, it's a prototype, it runs, it's on the road all the time. This is our design to manufacture. So, this is actually what's going to end up in series production. That's progress. That is what we're investing in. This is how we get to our on-target SOP of next year.

Darrell Bishop: Yeah. Let's go see the bike. Come around, come with us.

Sue Ozdemir: Don't pan around and look at the cool cars as we go though.

[laughter]

Darrell Bishop: So, as you guys know, we've been working with Zero-great partner-for a while. We're moving into the next series of what that's going to look like from a partnership perspective. Excuse me, gents, just going to bump in here. We're doing a live video if that's okay. Zero motor, 100-volt Exro drive. You guys have seen what this looks like outside of the vehicle. Come with me. Let's have a look at what it looks like on the bike.

Sue Ozdemir: And you're going to see the bike has some new branding on it. It's an Exro-branded bike. It is still a Zero motorcycle. The partnership with Zero stays alive and well as we figure out how we get to the next step. But this bike is really about more than just what we've done with the drive. It's about how we manage and how we really bring up the performance.

Darrell Bishop: And when you look at the motor, here's where our drive sits. So, it looks like it's completely integrated with the bike, but again back to the core technology and what we do, we take performance to another level. We can do two things. We can optimize the system, which is what our larger fleet vehicles are mostly looking for. "Hey, come in and help me drive down costs." Or we can go for performance. We can increase performance by up to 50%, depending on an application. The Zero bike is exactly the right system for that. It's all about performance but without sacrificing efficiency. So, this drive powers this motor. This thing is an absolute beast. It's a showstopper. It looks badass wrapped in black like the Humvee here. And between this and the Humvee, we're getting a lot of attention here for you as shareholders.

Sue Ozdemir: So, we know you've seen the Humvee a lot but we're going to take you over to see the Humvee.

Darrell Bishop: Come this way.

Sue Ozdemir: So, we've all seen the Humvee a lot. There's nothing new about the Humvee. There's been no additional upgrades to the Humvee. But what I want everybody to realize is, again, the idea of our live updates is to let you guys see as much as we can see behind those doors. We want you not to have a surprise element. We get to walk inside these doors every day and we get to experience the progress that we're making. And we get to know that while the market is volatile, inside we're actually quite stable right now, and the progress has been phenomenal. So, remember that drive that we just showed you, that's an 800-volt drive, slightly less power. It's going to go in a slightly smaller size vehicle but still a commercial truck. This was the first drive that we launched last year for CES. So, this one's the 800-volt HD silicon carbide with the TSA. This has best-in-class performance for torque. There is nothing on the market today that has the torque that we're able to drive with this combination. But again, we can scale that. So, we can scale it all the way down to that motorcycle. We can scale it up to an 18-wheeler or a train. And we can do anything in between. We have those three core products for the Coil Driver: the 100-volt, the 400-volt that we saw at the beginning, our 800-volt. Those are three core products that we can just continue to expand. We don't need to develop anymore. We just keep putting it out to different customers. And so, the show today is a great way for us to show the world our confidence in where we are as a company, our confidence in where we are in de-risking our product, and our confidence in staying on track for SOP, which is start of production of Q3 of next year.

Darrell Bishop: Yeah. And for our shareholders, that's really what it's all about. We know that the market is challenging. We know that, hey, we've seen a bit of a bump off the bottom here. We're building a long-term company that's valuable for you as shareholders. We're not about just coming out with these promotional pieces trying to get a bump up in our stock. What we're going to do is we're going to build credibility for you guys. We're going to continue to show that the product is de-risked. We're here at SEMA! We drove this thing down Las Vegas Boulevard a couple of days ago. We'll send you some videos, we'll post those online. But when we move to SOP in Q3 of next year, we know that the world changes for Exro. We're intent on making sure that you have the most shareholder value possible as we build this company in the significant revenue ramp up. And this is a much bigger audience than just selling our EVS kits here today.

Sue Ozdemir: So, let's go over here for a second just to let people be able to see the Humvee. We've got some people waiting. And so, you can see we've got full product brochures that you can find on our website. But as you think about the EVS Division and why we're highlighting that, it's a great benefit, it's a great extra to the company that we're able to offer these kits. It's a great advantage to all of us as shareholders, myself included, that we're able to have this additional revenue stream that gets the product out on the road a little bit faster than we do with the larger OEMs because it's just a more nimble audience, more nimble market. But really what EVS is, is about the strategy. There's nothing more important than what Brian and the EVS team bring to us from an initial integration perspective. So, with their team, a customer has one stop. They can come to us, and they can talk to us about anything from how they design their powertrain to what size battery they use to how they repurpose that battery, and Brian and the team are able to service that. There is no other inverter company that has that level of engineers on board. It's one of the reasons why when you look at our website, we continue to have a lot of roles posted. I have 20 roles posted right now, I'm not hiring 20 people. I'm hiring one or two of the best people we can find for power electronics and software. And being able to deliver the technology side of what we do. It's not just a hardware solution. It's not just a software solution. It's a combination, which means we need a lot of really smart people.

Darrell Bishop: Yeah. And I would say we're motivated.

Sue Ozdemir: Yeah.

Darrell Bishop: Internally, we are pretty pumped. We know what we're building, we see the demand from a customer perspective, and we've said it before, the demand is not the issue. And that demand is not just from smaller upfitters. It is all the way up to some of the largest companies in the world. And we're still committed to delivering on our Tier 1-

Sue Ozdemir: Yep, Tier 1 strategic partner by the end of this year. We're committed to all of our milestones. We've got obviously-these next few weeks are critical to the next milestones with delivery to SEA and delivery to Linamar. We're on track to do that this quarter. We're on track to have our strategic partner. And again, we're on track for production in the third quarter of next year. I think when I think about myself as a shareholder, I think about the employees that make us what we are today and what we're all thinking about. I encourage everybody to remember that this live update is informal. This live update is so that you can share the great things that we get to share. The number of people-I wish I could share the audience that comes and tells us how great and how different what we're doing is and how important it is. The formal one, again, is at the end of the month, November. We'll do an actual shareholder update where those of you that want the more material items will be able to have that. But as you think about it, think back to that live panel that we did in our live update last month. That really, for me, answered a lot of questions that I continue to have. So, yes, capital is front of mind for all of us. And yes, we feel confident in our strategy, in what we're doing, in what we're planning and doing our best to make the best raise for everybody that doesn't dilute us. There's never a guarantee to running a business, especially not a startup business. But we feel confident in where we are. From a product perspective, as I've said multiple times today, we're on track. From a commercial partnership perspective, the demand remains overwhelming. Our kind of catchphrase around the office is, we can only imagine what's going to happen when the product is fully validated on the road. Customer demand is not our problem. Delivering, making sure we execute, making sure we keep up in these markets, of course, those are things we need to navigate. And then, of course, the supply chain is a little bit better right now. Not like what it was partly because of how we manage that and our fantastic supply chain team, led by Simon. But also, because we thought about it a long time ago and things are getting a little better and in other ways they're getting worse, but we're in a good place. So, there's nothing keeping me up at night in those aspects, and it's been really interesting to see the dynamic of the show this time.

Darrell Bishop: Yeah, it's so diverse in terms of the interest that's here. But just everything, again, from hot rods all the way up to now electric vehicles, and you can see how people are starting to think about the integration of it all, how does it all play together. And we are at that cutting edge. We could pull this Humvee up and technically when we have the UL certification, we could charge half of this building, we could power some of this building with the Humvee. And again, when you think about it, it's not just dropping an electric engine into these vehicles. We think about the entire ecosystem that exists around it and how can we extract as much from that for shareholders and turn that into shareholder value as possible. So, we're excited about what the next few months hold. We're excited that we were able to give you a look inside of SEMA. We'll probably get back to the show here and-

Sue Ozdemir: I'm going to hijack them for one more minute.

Darrell Bishop: Alright, go for it.

Sue Ozdemir: I'm going to hijack you for one more minute. So I'm going to take it off of the Exro product, off of the off of the day-to-day business, and we're going to talk a little bit about electrification in general. And so, I've attended a few shows. My team has attended a few shows this year, trying to gain knowledge on really what are the trends. How do you make sure as a company, especially when you're a first-to-market company, that you stay ahead of the trends? You attend trade shows, you listen to the people that are here that are smart on what's happening. And as I look around SEMA and I see that they are launching their first real efforts into electrification, the real issue is there is not enough component companies building high performance parts at a cost-effective point that can service the electrification movement. That is a reality. And as we think to commercial trucks, and the net zero guidelines that are being set by our governments, and fleet operators that have to go out and buy trucks that are going to be on the road for 10 years, they need quick access to complete solutions for powertrain. And so, not only are we first to market in our technology but we're first to market in our strategy for how we're going to market and that flexibility. And so, as you think more about what we're doing here at Exro and how we're building, our R&D department also continues to be strong. We're looking at additional patents, we're looking at additional things that take the Coil Driver into other avenues. So, our view doesn't stop. We don't get a sunset on our products in the next several years. We get an uplift as we continue to find new markets that we amplify through. So, I just wanted to share that the electrification market may seem like it's totally saturated, but it is so much in its infancy. And today, as I hear combustion engines roaring-and while I love a good classic car, they're roaring around us-when I start up that Humvee in our floor and it's got no sound, it's a pretty amazing feeling to know that we're driving that maturity to the electrification transition. Thank you all for your support. We're going to get back to some fun at the show and we look forward to talking to you at the end of the month. Thank you, Darrell.

Darrell Bishop: Thank you, Sue.

Sue Ozdemir: Talk to you soon.

Darrell Bishop: Thank you.