Exro Technologies Inc.

Good day everyone and welcome to the X-ray Technologies Q3 2024 earnings call. At this time all participants are in a listen only mode. Later you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note this call may be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Jeff O'Dowd. Please go ahead, sir.

Good afternoon, and thank you for joining today. We'll discuss our performance of the third quarter, followed by a Q&A session. Joining us today are Sue Ozdemir, our CEO, and Gerald Bishop, our CFO. During this call, we will make forward-looking statements. Actual results could differ from those expressed or implied. We undertake no obligation to update or revise any of these statements. Relevant factors that could cause actual results to differ materially from those forward-looking statements are listed in our ND&A for the quarter that ended September 30, 2024, which can be found on CDAR and on our website. In addition, during the call, we may refer to specific non-IFRS measures. These measures are also reconciliation of non IFRS measures to the most directly comparable IFRS measures. Management believes these non IFRS measures provide useful information to investors regarding the corporation's financial condition and results of operations as they provide additional metrics of performance. These non IFRS measures are not recognized under IFRS do not have any standardized meeting prescribed under IFRS and may differ from similarly named measures reported by other issuers. Accordingly, they may not be comparable. These measures should not be considered as a substitute for related financial information prepared under IFRS. With that, I will now turn over our call to our CEO, Sue Ozdemir.

Thank you, Jeff. Thank you everyone for joining us today. We are proud of the operational and financial results we achieved this quarter and excited by our momentum heading into next year. We continue to deliver against our core strategy and make progress towards our key milestones of revenue growth, profitability, and technology integration. Our diligence and focus on execution drove revenue growth of 108% while also reducing costs. This revenue was driven by delivery of a company record of 74 e-propulsion systems to blue chip OEM customers, 106% increase over our Q2 2024 results. While we still have a way to go, we are moving closer to the future we all envision. I'm going to take a little bit to talk where we're living today we are living in an era where electrification is the now but the world is still grappling with this transition and the mass adoption of electric vehicles from grid inadequacies to electric vehicle adoption the quest for energy efficiency is paramount the barriers to electrification are many but we can group them really into three key buckets that continue to challenge everyone, including Exro, in the industry. From large legacy OEMs to emerging companies like ours, to motivated fleet owners that want to go green, these are some of the top challenges. Cost. Commercial vehicles are company assets. They are needed to deliver and aid a company's business outcomes. Beyond being energy efficient, these trucks need to have a total cost of ownership that makes sense. Within the passenger vehicle sector, the reasons are slightly different, but cost still remains the issue. This is a key challenge that we see OEMs striving for, trying to get to profitability through vehicle platforms that are affordable, with most global passenger automotive OEMs trying to aim for a sub 25,000 price point. Later, Daryl will delve into issues like this, the cost, and we'll discuss how our success is continuing to drive down costs on a unit level without compromising performance. The second issue, performance. Now, going beyond the driving itself, but being able to achieve the outcome that's needed of that vehicle, a garbage truck that can pick up the same number of routes, or an urban delivery truck that can tackle the heavy bulky loads with the same ease as intercity light loads. The variability of driving conditions and in particular fleet groups needs to be considered. This is how we at Exro talk about performance. There is no single solution as everyone drives differently. From the roads we climb on to the weather we navigate, the ability to tackle all conditions is how we achieve True mass adoption. And finally range. Now I know when we all think about range, we think about range anxiety charging station, but that is actually progressing in the right direction. There is a lot of work left to do, but we are overcoming this. We have many more chargers. Cross North America today than just a year ago. But in fleets there is still some work to go from a charging position. And we need to think about that impact on our grid and what we're going to face in the months and years to come. Central to the electric transformation is innovation. And in particular, innovation in power electronics. It is through power electronics that we control electrical energy and energy efficiency. This capability is where Exro shines. Our technology optimizes electric vehicle propulsion systems by expanding their capabilities of electric motors and batteries, which are two of the foundational elements of the electric transition. With our innovative technology, we have demonstrated that we can achieve performance without compromising price. Extra patented technologies provides the solution to achieving power trains with less complex systems that can deliver unprecedented real-world driving and cost-effective solutions. Our system utilizes power electronics to bring fast charging onboard the vehicle inside the inverter itself. The end result is charging infrastructure costs that are 10 to 20% of the cost of the DC fast charging stations in the market today. Our technology demonstrates the difference that real innovation makes. The transition to electrification is underway and innovation is the key to our future. While we are proud of our progress and the accomplishments, we believe that there is still a significant potential to drive further improvements in both performance and cost efficiency. So now let's dig into our Q3 financial performance. The past six months have been dedicated to execution on our core pillars that were part of our strategy for merging with Steelectric in April of this year. I'm going to spend a few minutes discussing where we stand with each of those core pillars and why we are proud of the progress. Our first pillar was around consistent growth and how we demonstrate building that foundation towards that growth. In Q3, we were able to deliver 74 propulsion systems, double what we did last quarter. While lower than what we had anticipated at the deal closing in April, this represents significant progress, especially given the challenge that we highlighted in Q2. This quarter, we course corrected and implemented key quality metrics, improved processes, and doubled down on our strategic supplier agreement. The quarter highlights not only our ability to deliver consistently, but also our commitment to ensuring that this momentum continues. Backed by our blue chip OEMs, we are now poised to ramp up production, which will in turn drive growth and scale. The second core pillar is our path to profitability. Delivering a record number of systems to top OEMs is not an easy task. Our team not only delivered, but also drove substantial cost savings that exceeded our initial goal of bill of material cost reductions of 5%. We have achieved over 18% savings on our systems since April 5th and remain focused on our path to profitability. As we talked about at the start of today's call, this is a core objective as this is key to the transition is performance without compromising price. Innovating great technology is hard. But innovating great technology that is affordable is exponentially harder. EXRO has long been committed to innovating while growing revenue and achieving profitability. Now as we continue with full commercialization, we are focusing on programs that have visibility to profitability. Daryl is going to discuss our progress in more detail, but I will note that we improved our unit cost of goods sold by more than 20% over last quarter. And finally, our technology disruption. As I said, Innovation is the answer to an electrified future. Regardless of the sector passenger vehicles, commercial vehicles, the answer lies in our ability to deliver solutions to solve our customers challenges. Improved energy efficiency and performance will driving down cost. Our patent technology has been integrated with our OEM partners. And it continues to progress. we not only are able to produce more systems at a lower cost, but we're improving the technology as well. The integration of our coil driver into all Exro propulsion systems remains on track for second half of 2025. We will provide more detail on our technology roadmap tomorrow at our inaugural analyst day. Before turning it over to Daryl to go through our financial summary, let's go over an operational update. I wanted to take a minute to address some items as we continue to progress and evolve our organization. To do this, I'm going to walk through our progress from April when we closed the merger until now. At the time of closing, we had five strategic goals for 2024. The first was delivering on 250 units in our first six months post-close. In Q2, we discussed certain integration challenges and their impact on our business and forecasts. We have worked hard to overcome these challenges. And while we cannot make up these units in the short term, our performance in Q3 should speak for itself in our commitment to delivering consistent quarter-over-quarter growth. With year-to-date revenue of $16.3 million and after six months of execution, we are now delivering against orders, backlog, and future demand. Our future is bright. The second was our cost savings of 20% across the business. Again, we've long been committed to the foundational processes and systems that deliver efficiency in operational execution. These initiatives are not always visible externally, but they are the foundation of how we've been able to overcome many of the challenges post-merger. These behind-the-scene efforts have allowed us to recognize on a quarterly basis the growth that we've seen quarter over quarter. They will become more evident as we continue to progress the business. The third was our first joint integrations. Our Hino platform was committed as our first integration partner, which we announced in August. This work continues to progress and we are pleased to announce that the vehicle is on site here in Mesa for our analyst day tomorrow with coil driver inside that allows featured extra patented charging solution. Our guys have enjoyed being out and driving the vehicle today and really being able to not only see the coil driver, but see it charging and really in full position. In addition to our Hino integration, we have targeted a MAC integration for the fourth quarter, which remains on track. Supply chain efficiencies with a 5% reduction in bill of material. This is one of our big steps forward. was an aggressive challenge although it may not seem that way with five percent we continue to make progress on our efforts to reduce costs we focused to reaching this profitability target and with the support of our partners we exceeded our expectations and delivered over 18 reduction in our bill of material in the past six months we'll provide more detail on this goal on our analyst day tomorrow these costs out have been driven by strategic sourcing within our supply chain, efficient ordering, and efficient logistics. And finally, our new innovation program. The Stellantis program announced in late Q3 provides a monumental step forward in our developments in the passenger vehicle segment. This program has pushed us to develop our cost position and improve performance without compromising price. As we develop our work within the passenger vehicle segment, We continue to stay on focus with our two key partnerships and mid and late stage discussions and have an additional partnership in commercial trucking that is progressing through commercialization as well. These top pipeline positionings are progressing as we had hoped for this time of year. Overall, will we recognize the frustrations experienced over the past year? I'd like to take a moment to say thank you to our shareholders and to remind all of our stakeholders that we cannot control the pace of the broader transition, but we can control the aspects within our reach. Our patented technology is fully de-risked, is demonstrating best-in-class performance, and is integrated into top OEMs in electrification. We continue to control our costs, developing ongoing cost reductions, and we control the partnerships we select in which we enter into, ensuring we collaborate with market leaders who share our commitment to excellence. I recognize all of the challenges and I acknowledge the misses that we've experienced. However, our vision of being best in class supplier for power electronics remains the same. We are ready to scale and grow alongside the ongoing transition. Thank you. And with that, I'm going to pass it over to Daryl. Sorry about that little mix up there. I thought my voice had went off on my phone, so I apologize.