Exro CEO Sue Ozdemir and Exro Vehicle Systems President Brian Van Batavia take a behind-the-scenes look at the Company’s Ann Arbor, Michigan facility.
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Sue Ozdemir: Good afternoon, everybody. Thank you for joining us for our second live stream. For those of you that didn't join us or just joining us for the first time today, I just want to remind everybody that today is actually live. This is not pre-recorded, not pre-edited. I've got a great team helping me to put this all together and we're going to be sharing a look inside. This series is really all about sharing with our shareholders and my commitment to be more communicating with you all. So, this is really about how we take you inside and show you what my day looks like for the most part. So, this week I'm in Detroit visiting with Brian and the team. And we were out at a military trade show yesterday showing off our Humvee, letting customers take a look and take a drive and being able to just really experience our demo vehicle. So, if you're joining us for Exro for the first time, what we want you to remember is that we are power electronics experts. Hopefully you've all seen our great news yesterday with our partnership with SEA Electric and how we've been able to take yet another partnership through to the next stage. Before we keep going with that, I wanted to acknowledge as I'm sure a lot of you are feeling like things are moving a little bit slower than you'd like. And as you think about that, I want you to think about any great product that you've seen come to market, first to market. Not like everything else that's already in the market. That doesn't happen without bumps and bruises. That doesn't happen in a linear line. So, I continue to say we can't make apologies for the delays that we've experienced. What we will tell you is that we maintain our commitment to grow our revenue next year through the multi-year partnerships that we've been able to contract this year with vicinity, evTS, and now SEA Electric. We have multiple other customers that we're currently working with and we're very optimistic that those could come through in days, hours, weeks as we work to close in on our next contracts. What we're doing is filling our facility, but more importantly, we're building multi-year business for everybody to feel good in our long term. And that happens now. That's because the product and our demos are able to show our customers that we're truly transforming electrification. We're making people think about how you do more with less. Everybody is focused on how we bring new vehicles to the market but it's what's inside those vehicles that's really going to make electrification take.
And so, our electric vehicle systems division was a really important strategy for Exro as we wanted to create that ecosystem. We already have the control of how we control a vehicle, or an energy storage, or other applications. We can repurpose batteries and have the full circular economy. But how do we get in right from the start? How do we look at that design stage? That system integration stage? That software side?
And so, I met Brian quite a while ago but through Exro. And we really got to know each other as Brian was the brain behind the conversion of our Humvee. And after we worked on that project together, I think we both knew that it was meant to be that we worked more closely. And so today I'm going to introduce you to Brian and let him show you around his facility and his team here in Detroit.
Brian Van Batavia: Hey, Sue. Thanks. Yeah, it's not just my facility, it's really yours too. We're really one big family. But it's really worked out really nice to join full-time. Yeah, so the idea today is we just walk around the office similar to what we do with other stakeholders or potential clients. We always start right here in the beginning, in the front, and we look around the office. I tell people we have room for about 35 engineers in this open office working space. It is just that. It's pretty open. We put a lot of work into actually revising, revamping, the look and feel of the facility. New carpet, new paint, new led lights, that kind of thing. So, we feel like we've created a space that's comfortable to work in.
As we walk around, we actually see one of the first vehicles. This is one of our internal demonstration projects. We've taken a baseline stock vehicle. Obviously, it's a motorcycle in this case. Put the Exro inverter on it. And we've done some testing recently to show that really it does improve performance efficiency, all kinds of good things. We have some more work to do on this particular vehicle yet. But I had a chance to ride at the chest track a couple days ago and it's pretty awesome.
Sue Ozdemir: Can you tell us a little bit about the test track that you went out to so that everybody can hear what we did out there?
Brian Van Batavia: Yeah, we went to a partner group of ours, out just west of us, about an hour. And they have a test track with a straightaway and some flat surface areas where it can be a closed course. Obviously when we're doing testing on prototype vehicles, we want to have an area where not on public streets, that kind of thing. And then they also, in the back part of the facility, have a big off-road park, really. So, there's some gravel, and some logging trails, and some water, and rocks, and things like that. And we had a chance to take the Humvee along as well. So, we had a lot of fun doing some things with the Humvee in the morning. And then, just in the early afternoon we did some riding on the bike. So, it worked out really nice.
Sue Ozdemir: Awesome. And for those of you that haven't seen the videos, you can get them online on our social sites and get a little taste of what Brian and his team was doing out of the tracks with our vehicles.
Brian Van Batavia: Just as we walk around the building here, take the lap to the back, this is another area we've purposely carved out by the windows in the front. It's a little more natural light. And our team is growing now, we're over 20 people. So, we line up along the table here and have a stand-up meeting, generally once a week, but sometimes more when needed. We have the TV where we can display PowerPoints or things like that. We do a lot of scratching on the whiteboard, as you'll see as we walk by. But we're just talking about the goals for the week, what the projects are, and in particular if anybody has any issues or blockers or things like that, or they can't get their job done, we want to hear about it. So, we just wrangle as a team. "Oh, I'm not-I don't know where this is. Does anybody know?" And somebody else will pipe up and chime in. And so, it's a way we stand up and get those things done quickly.
Sue Ozdemir: So, as we think about that day in the life and how we're looking behind the scenes and how we're going to be taking you, this is our first one here in Detroit. We're going to take you through Arizona. We're going to take you through our "So what?" of Exro, and we're going to be doing a lot of these live streams so you can really get a feel for why we are all so excited. So, as you think about what the team is doing here, this is really about how somebody comes up with that initial idea. How do we look at anything that really wants to be created in the e-mobility space and go... How do we design that? How do we work on that? And we have a lot of projects already ongoing here. So, we're going to go through the rest.
Brian Van Batavia: Yep. And on the way back to the shop where some of the more physical examples are-just point out some of the rooms we have in our facility. This is our main conference room. Obviously, we do a lot of client meetings in there but anytime we have a large kind of, maybe a failure mode analysis meeting or something like that, where we want multiple engineers to collaborate and get together in the large conference room.
Sue Ozdemir: And again, as we're going, we're not scanning all over. It's just-it's really hard because we're doing it live so we're showing you what we can show you. What we want you to see and letting you walk how a customer would walk and come and see and visit with Brian.
Brian Van Batavia: The next room along the progression here is actually what we're now calling the Confidential Projects Room. So, we had a couple of opportunities arise where we actually wanted to segregate some parts of the team so we're not mixing one project with another. Sometimes clients, of course, want to be very anonymous. So, this way we can do that. We sealed off the room on the ends and we have a key card access here only for certain personnel. So, this is sort of the Confidential Product Room-Project Room, sorry.
Sue Ozdemir: That's where the really good stuff happens.
Brian Van Batavia: Yeah, right. We can tell you but then we'd have to kill you. The next room actually we called a Low Voltage Testing Room. So, this room, if you peek inside, has a new tile floor that's grounded and everything, so we have ESD protection.
And then we have testing going on in here that's primarily about software in a vehicle control unit or a VCU, that's how we sometimes refer to it. The software goes into the VCU and then we have a HIL simulator, a hardware-in-the-loop simulator, that can actually simulate the vehicle and the driver, and the test track and it gives real physical or electrical inputs and outputs to the VCU. And then test the software like in the computer actually so it's a pretty sophisticated way of doing software validation testing and it's all automated. So, we can run these scripts actually overnight, 24 hours a day, seven days a week, and get a lot of stuff done.
Sue Ozdemir: So again, as we think about that, and we tie it to electrification and for those of you that have heard me talk before you'll know I often try to calibrate back to the what's in an electric vehicle. So, we've got-the battery is the boss and we're going to look at some battery stuff out there. We've got the inverters, which is our Coil Driver and our controllers, which are kind of the brain to the system and how the motor works. The motor is kind of the workhorse, the power, how it turns the wheels. And then you've got the VCU. And the VCU is really that communication and vehicles don't move without a VCU telling everything how it talks to each other. It's like a poorly functioning team. Then, right, they're not going to talk to each other and it's not going to be safe, and you don't want to get in a vehicle if you don't have a good VCU.
Brian Van Batavia: Yeah, that's absolutely true. The VCU really is the brains of the vehicle, usually coordinates all the torque production and all the safety features, things like that. Sometimes it can collaborate with other controllers on the vehicle but it's absolutely what we focus on, is that core supervisory software on the vehicle.
Sue Ozdemir: So, Brian, I'm going to put you on the spot because we didn't pre-test this at all. So, I want to talk to you a little bit about-in your experience, because you have a lot of experience we did talk about in the beginning. You've been doing system integration and working with electrification and vehicles for a very long time.
Brian Van Batavia: Yeah.
Sue Ozdemir: And so, when you looked at the Coil Driver and you thought about your expertise in system integration, what did the Coil Driver and what Exro's doing-what made you want to be here? What's your why for Exro?
Brian Van Batavia: Yeah, I think it's really interesting that the Coil Driver technology maybe isn't like as a fundamental thing that new, but the way that you guys have combined that with some software that actually decides when to use it and when not to use it and some of the nuances, it's actually a software smart product. So, it's not just the fact that there's this Exro power electronics in the inverter that can drive two different windings but the software of deciding when to make the change, for example. Some of the nuances of what to do with current management and things when it does that change so that it doesn't create a lot of electrical noise, to me, it's like really a software product, even though it's not software.
Sue Ozdemir: No, I'd agree with you. We like to-when I first joined especially, we talked a lot about how what we really are is a technology company. And so, the technology to the software, the technology even in our own drives, the embedded software that's in our own drives. And so, as we think to the customers and for our shareholders, as you're thinking like that-so what? Why do the OEMs, why do the tier ones, why our partners like Linamar and others under NDA working with us? I think it's really that we play into that total cost of ownership and it's not in a way that's easy for all of us to understand because we're just looking to buy the vehicle and we're just looking to make revenue and we just want to build business. But the reality is our customers are looking for a lot more than that. They want a proven solution that lets them see that they're going to save upfront costs through features like coil charging or the ability to reduce the gearboxes. They want things that are easy to integrate through the VCU and system integration. They want something that differentiates themselves from the hundreds of vehicles that are coming out now and that can all be done through the system integration as well. So, I think all of that plays into how we deliver that total cost of ownership and how we play a part in a more sustainable future by driving electrification up and combustion engines down.
Brian Van Batavia: For sure, yeah. Another part of system integration is wires. So, this room actually is the electrical building test room where we do a lot of harness builds. We do some investigation things in there tearing things apart, figuring out why they broke, that kind of thing. That's the room where we do that. As we keep going actually then kind of the story that I tell clients honestly is it goes from that virtual software test area to the HIL simulator, where it's low power, but then this room actually is envisioned where the high voltage or high-power testing happens. So now in this room we're actually turning on high voltage, it's actually a little bit dangerous, right? So, in this room we, again, have the key card access. We want to make sure people that go in there are trained, they have the right personal protective gear, that kind of thing. And we want to just isolate it from the main work in the shop, nobody's spilling coffee in it or anything silly like that. So that's why the doors are closed. Over here if you had a chance on the camera to peek, we have a little kitchenette area. We have a lot of fun and laughter in there and sometimes interesting arguments. And then we have a stock room on this side of the hallway. We actually want to execute projects quickly for clients. That's actually usually one of the values that we provide. We can be separate from their main organization and execute really quickly and rapidly outside of the boundaries of their walls. So having some parts on hand actually pre-bought for projects really helps accelerate things. We just want a project where we actually have all the parts in the room already to build the system. So that really does help. All right, we just have our normal whiteboard things where we strategize for the day, what's going on in the shop. We have a tool storage room here. We have air compressor and dirty noisy things here in this closet. And then actually the shop, so where a lot of the work happens.
Sue Ozdemir: So, the shop here, for those of you that are going to be following the series and looking inside with us, is really different from what you see from the facility that we showed at the last one. That's a manufacturing facility, it's a clean room, much, much different. When we start showing you our innovation centers and our test centers, you're going to see something totally different than we see today. This is a lot of different parts and pieces, a lot of parts of the system that are coming together and a lot of different disciplines and expertise that's going into the finished results. And there's a lot of great people helping Brian to get that across the finish line.
Brian Van Batavia: For sure. It's absolutely a team effort. You can see some of the folks here working on a battery pack right now. This is for a client project. The pack is completely designed for a given application. It just barely fits up into the vehicle that's back there and we're planning to go help that client actually do some testing. So, it's not just something that's going to look nice. It's actually got to be functional too. They're going to put some miles on it. So that's a really nice project for us to be able to dive in deep to a battery pack and then also help with the integration of that pack and their drivetrain into the vehicle.
Sue Ozdemir: All right, so before we take a drive and we have a little bit of time, so we're going to talk a little bit about the demo vehicle. So yesterday we had this demo-so last week, let's start there. Last week, we had this demo out on the test tracks. You can find the videos online. And what those videos are really showing you is the different terrains. A lot of people have been asking us about the specs and the comparisons and how we do that. And so, from your perspective because you are kind of how we integrated this, I want to remind everybody this was a military Humvee, fully camouflaged, not on road, not certified. We're going to get it in for emissions testing if those of you that have followed me, because we have to prove that it's electric because it's not been done. But the point of this was power. It wasn't about showing that we could be the smoothest drive or the next Tesla. We can do that if we did a different design. This one was about showing that extreme amount of continuous torque and power that we can deliver through the Exro Coil Driver and then tying that into, like Brian said, the wiring and the harnessing and the VCU and how we deliver a truly exceptional demo. And for me, taking it out yesterday was the first time that I-Brian has been able to show it off to a lot of customers over the last few months. Yesterday was the first time that I could be with the customers and hearing what they said in front of the vehicle where we're driving and we're seeing it and we're actually performing with it and Brian and I took it out for a drive in the parking lot. I've driven it in Arizona, of course, but you know it was just a totally new feeling to see it in front of the customers and in front of students. And so, tell us a little bit about your experience with the Humvee.
Brian Van Batavia: Yeah, I mean it's been a really great project. But what really honestly for us was really, really nice about it is when it's sometimes for an external client you're under a different sort of timeline and pressure to get it done by a certain date. This was a case where we actually could control the timeline a little bit more even though we wanted to go to the CES show we knew we had to have it done by then. So it was, yeah like I said, we weren't able to re-engineer the whole vehicle. The idea was just to put the Exro inverter inside and show the world that it's real, that it can be put into a vehicle that's pretty harsh, kind of got some big power requirements along with it. The goal wasn't to make the most refined vehicle in the world. It wasn't to make it the lowest cost or the lowest sound, anything like that. It was really just to show the power of the actual inverter and an interesting vehicle platform. So that's what we did. We just found this real old, you found the real old vehicle, handed it to us and we painted it, made it look nice. But really it was the design of the whole entire electric powertrain. We dropped out the initial powertrain, of course, which was a diesel engine and automatic transmission. Took all that away, all the fuel systems, all the exhaust, all that kind of stuff. Replaced it with this custom designed electric powertrain and then again, the software. Yeah, so custom wire harnesses, custom software to control everything, some custom software actually to interface with different parts of the vehicle. We have to monitor, for example, the hydraulic pressure that's supplying the brakes, the power brakes, and the power steering, things like that. So that makes it safe. So, it's actually a pretty interesting little project to touch a lot of parts of the vehicle even though we didn't really change the wheels, the tires, the hood, or anything like that. Like all of the guts inside really are new.
Sue Ozdemir: And so, as we think about what that means for Exro and what that means for you as our shareholders, I think about how we've always talked about the scalability of the product. So, this is a demonstrator. In this size of a vehicle, this demonstrates the power. The motorcycle out front demonstrates our speed and our power in a two-wheel application. It's the low end of the drive as far as the smallest drive that we currently have. So, we can do that scale. We could scale this one. This exact drive could go into a class 8 garbage truck and do the same type of performance that we see now.
And so, as you think about that scalability you also want to think about our design philosophy and it's one of the reasons why we've been a little bit longer to the finish line is that our design philosophy has always been not just making a prototype but making a design-to-manufacture drive. So, we're doing those two paths in parallel. So, if you look up a lot of startups, what happens is we build products and then those products are fantastic. You have a race car that can win the fastest mileage in the world or the fastest track in the world, but you can't actually get to production because when you get into production it's ten times the cost and you're not actually going to do it. The end goal here is to help bridge the gap to electrification. So, if we're going to do that we want to drive down the cost of an electric vehicle. We want to make sure that we're helping manufacturers to look at that cost point and to be able to do that you want to be able to eliminate or reduce out your two-speed gearing. You want to be able to do things like the Coil Driving Charging and help fleets to look at a different way of energy management. You want to be able to look at the cost of balancing your cells. And so, there's a whole list of options that's very customer specific. How the range is affected is very customer specific because it's vehicle-oriented, it's battery-size-oriented. So those are questions that we're working with on our customer levels.
And it's important to know that the vehicles that we're making are just demonstrators for what we can do. And so, as we did this one, we also have our Linamar drive going out in the next month, we have our first pilots going out to SEA Electric and Vicinity before the end of this year. We have our pilot for evTS already operating and our pilot for Potencia and our customer up in Europe. So, there's a lot happening and there's a lot under NDA. I promised you just a month ago that we'd be pulling customers up and progressing. SEA Electric was the first one. There's many more. That's not what I was referencing the last time. I've got my running shoes on for a reason today. Brian and I are going to go out for a coffee. We took it out last night. We're going to jump in. It's been a short day and look inside today as we shared with you how we start the journey from the customer and how we really start talking with the customer right from when they're looking at design and we build that loyal long-term partnership. As we go into our next live streams and our next look inside, you're going to be meeting Eric, our CTO. You're going to meet with different members of the team that show you how we test a drive, what's involved with testing a drive, how we walk through with a customer, how we walk through or how we present. There'll be lots of topics that we're doing. If you have topics that you'd like us to cover. Things you like to know about, what we're doing in our day and how we're doing it and why we remain so excited as Exro, then I think just send an email to myself or to our IR team and we'd be happy to respond. If you have questions that you'd like us to look at, please let us know. As a publicly traded company, these aren't about releasing new updates. We'll make sure that we indicate when they're updates. What I want you to know today is just some confirmations on a few questions before Brian gives his last thoughts before we drive off. But I want you to know that from a Nasdaq perspective there's been a lot of questions and clarifications on where we are positioned right now for Nasdaq. As we have mentioned in our reporting, we do have our acceptance from Nasdaq. The timing of when we go to Nasdaq will be partly market driven. For right now, today, I don't have that date for you. I'm focused on getting that production across the finish line, on getting us to that revenue. We've hit our first revenue if you've looked at our financials. Yes, it's not big but it's our first revenue and a large portion of it is coming from right here in Detroit from the EVS team. We're starting to see our customer projects progress just the way we all wanted. Our supply chain issues seem to be under control. They're not over. Everybody's still having them. There's a reason why companies are delaying, but we seem to be under control there, nothing that's worrying me. We remain first to market and ahead by a long shot from anybody trying to do the same thing as us. So, from a Nasdaq perspective, I think we're prepped and ready and soon as we know our date, we'll tell you. And then from a litigation perspective still not much more to update you on. It's not that I'm brushing it or doing anything. It's that my focus is on winning and making sure that we do everything we can to protect. What I can tell you is it is not affecting our day-to-day business at all. Our customers have NDAs. Our customers are able to talk to our legal team and our customers are able to get the reassurance they need to let us keep doing business as normal. I know you all want to know timing-soon as I have some timing-we're in a discovery phase, the lawyers are going through all those phases, as soon as I have that timing for you, I will let you know. But remember we filed the IPR, we filed our defamation case, we're in a great position right now. So, hold strong, hold tight and we'll be updating you soon. And then from there we're going to jump inside. And it is past lunch time here so we're going to go have a bite. We appreciate very much you joining us.
Brian Van Batavia: Absolutely, yeah. I think my takeaway is excitement. Really, like you started, I'm excited to be a part of the team. I'm excited that we're growing our team here and in fact I'm feeling a lot of excitement from our clients. Like sometimes people come to us looking for the Coil Driver technology, sometimes not. But almost always when I tell them about it, when we expose them a little bit to what it's capable of, they're excited to learn more. So, I just think that's the theme for the day. Thanks for joining us.
Sue Ozdemir: Thank you everybody so much, and I look forward to the next live stream in a few more weeks. Take care.
Brian Van Batavia: I'm going to get coffee out of the deal? Is that what I heard?
Sue Ozdemir: Yeah. Not food though.
Brian Van Batavia: No food?
Sue Ozdemir: No food, just coffee.
Brian Van Batavia: Just caffeine?
Sue Ozdemir: I'm glad you're driving because I always feel nervous about pulling out of the...
Brian Van Batavia: Yeah, it's a tight fit.
Sue Ozdemir: …the garage. It's so big.
Brian Van Batavia: Are we in? Beep, beep. Here we come. I'll try not to bump into anything.
Sue Ozdemir: Yeah, I was going to say, our doors in Arizona are a little bit bigger.
Brian Van Batavia: We do fit, that is for sure. How crazy can I get around the exit? Nothing too crazy I suppose.
Sue Ozdemir: No, you can't speed fast like we did yesterday.
Brian Van Batavia: Yeah, we had some fun yesterday too, didn't we?