Exro Technologies (EXRO.TO): UL Certification for Cell Driver Battery Module

Another 2023 hurdle cleared

Aug 23, 2023

New to the Exro story? Check out our Intro post here:

EXRO Technologies is a publicly traded Canadian company with a disruptive but complementary technology to electric motors and batteries that, in its simplest terms, aims to make electric vehicles perform better and cost less. The company trades on the Toronto Stock Exchange under the symbol EXRO and over the counter in the United States with the ticker…

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Exro continues to check items off its 2023 agenda, most recently with the certification of its Cell Driver battery modules by industry standard organization Underwriters’ Laboratory. As a reminder to readers, Exro’s Cell Driver is a battery control technology that provides superior cell level switching control, which makes the product far less likely to encounter thermal runaways (fires). More information can be found on our Cell Driver post here: (Link to post)

Source: www.exro.com

UL certification is an industry hurdle for getting new electrical equipment approved for market. The specific UL 1973 approval that Exro achieved provides independent verification into the Cell Driver’s battery module quality, safety, resilience and operability over a wide range of typical and non-typical operating conditions.

Next step – Full UL Certification: While a positive step, Exro still requires full UL certification for the full Cell Driver System. The timing of this has been bumped for late Q3/23 to Q4/23, which the company indicates is due to a backlog of other approvals with UL ahead of the Cell Driver in the queue. We do not see this as a material change with which investors need be concerned.

UL Certification: The Logo You Don’t Know You Know

Many home products we all use everyday, particularly electrical devices, have likely undergone UL certification at some point. It is a necessary, and frequently time consuming, process of ensuring companies bringing new products and technology to market meet specified criteria on safety and operation.

From the UL website (Link: www.ul.com) we find the following:

Depending on the certification achieved, companies will be required to apply decals or stickers to its products to display to consumers they have passed independent verification. Some of these logos you have likely seen around your house are shown below:

Once Exro obtains system approval, its commercial units will also display the seal of UL certification.

New Cell Driver Patent Awarded

Another key item in Exro’s recent update is it has achieved its first patent for its energy storage (Cell Driver) technology. The patent protection relates to its ability to deliver better charge, enhanced depth of charge, improved safety and longer cell life. We see potential for this patent to facilitate take-up with consumers once commercial production is achieved.

Bigger Picture Thoughts on the Cell Driver

While the UL certification is a necessary step in the approval process for Exro, we think there are other considerations for investors as it relates to strategy for the company:

UL certification will lead to order flow. Management indicates they are already responding to a high number of quotes for initial application of its Cell Driver.
New patent covers multiple applications. In addition to energy storage, Exro’s new patent is applicable to batteries in other uses, including the growing Electric Vehicle (EV) market. This could drive further demand growth.
Cell Driver could arguably be a standalone business. In the context of Exro’s primary Coil Driver technology, which enhances performance of electric motors in EVs, the Cell Driver represents a large opportunity in an entirely different market. As Exro achieves commercial production for both its Coil Driver and Cell Driver, if the market does not appreciate the upside potential in each (as evidenced by the share price), a spin-out of the Cell Driver is not out of the question, in our opinion. While we do not anticipate this type of transaction in the near-term, it is something we expect the Board and Management to consider over time as an option to create value.

Over halfway through 2023: Upcoming catalysts

We update our 2023 scorecard for Exro below. While we can’t give credit for full UL certification at this time, it appears very likely this will be achieved before year-end, with the UL 1973 approval a key hurdle. Thus, we give part marks on this front.

Commercial production imminent – we expect active news flow

As we have been noting throughout our Exro series, commercial production for both the Coil Driver and Cell Driver is expected in 2023. Exro remains on track to achieve this:

Manufacturing center in Calgary, Alberta on trach for commercial production in 3Q23
- Capacity of 100,000 Coil Drivers per year per 8hr shift (300,000 units at 24hr operation)
- Low Voltage units will commence first, followed by High Voltage units
Cell Driver production will commence in 3Q23 with integration to partners
Exro management expects to continue to move large customers out of NDA into commercial agreements
We see this as a key catalyst as investors seem to want clarity / visibility on partners with a strong brand

Exro has encountered into a number of partnerships for the range of its Coil Drivers and Cell Drivers. Looking into 2024, the company transition to commercial, revenue generating tech company with established business partners and customers. We expect to see the number and quality of investors in Exro continue to increase over coming quarters. A quick summary of existing agreements is shown below.

Disclosures

4Front is compensated by Exro for the preparation of these materials. 4Front receives its compensation in cash from Exro. 4Front participated in one of Exro’s equity raises and is currently a shareholder of the company.

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