RJ update A real analyst update versus the garbage from Mariner
EXRO TECHNOLOGIES INC. (EXRO-TSXV)
Auto Parts
Michael Glen, CFA | 514.687.5970 | michael.glen@raymondjames.ca
Sheldon D'souza, (Associate) | 416.777.7116 | sheldon.dsouza@raymondjames.ca
Heinzmann Update Outlines Commercialization Plan; Milestones Well Defined; Grow in Importance
Exro management has provided investors with a fairly detailed timeline of milestones and events to take place through the balance of 2021 (Ex 1). Such milestones include: 1. Additional deliveries of pilot/demonstration product (Heinzmann, Zero Motorcycle, SEA Electric), 2. Test results from pilots already shipped (Potencia + those mentioned above), 3. Additional commercial agreements with smaller electric vehicle OEMs (i.e., similar to that announced with Land Motorcycle), and 4. Perhaps the biggest of them all, the potential signing of a large strategic (Tier 1 supplier/OEM) partner in the automotive space before the end of 2021.
From that perspective, we would view the update provided this morning with respect to Heinzmann as exceeding our own expectations. Specifically, our expectation on Heinzmann was that we would see the shipment of a pilot product to the customer. Instead, what we saw this morning was an announcement regarding the validation of Exro’s 100V Coil Driver system alongside a Heinzmann motor. Specifically, this means that the motor works and delivers the expected torque and power results. Most importantly is that in conjunction with this validation, Exro and Heinzmann will now look to commercialize the integrated Coil Driver / motor solution during 4Q21, with first revenue expected in 1Q22. Our understanding is that the product will cover the micro-mobility market, namely electric bikes and scooters.
ANNOUNCEMENTS GROW IN IMPORTANCE THROUGH 2021; APPLICATIONS EXPANDING
What is even more important is that the news items anticipated through the balance of 2021 grow in importance. We are specifically referring to the proof-of-concept (PoC) expectations associated with Potencia and Zero Motorcycle, and that to come with SEA Electric during 3Q/4Q. In particular, the validations for the 400V and 800V Coil Drivers during 3Q/4Q (designed for larger light vehicle platforms and the commercial truck market) are quite meaningful events, that we believe set the groundwork for the signing of a large strategic partners before the end of the year. As we have described previously, this particular event, the signing of a large strategic partner, stands as a very significant potential catalyst for Exro's stock. It would not only provide strong visibility on revenue growth, but would clearly confirm the functionality and benefits that the Coil Driver provides and serve as a massive de-risking event.
DEFINED MILESTONES WILL REPRESENT THE TRUE BENCHMARK TO GAUGE SUCCESS
We recognize that Exro's stock has continued to see pressure since the publication of a report on Seeking Alpha earlier this month. We found Exro's response to this report as rapid and thorough, with management stepping immediately in front of investors to defend the company, and no wavering from any portion of the executive management team including the Board of Directors. Unfortunately, we recognize that there was considerable damage done, and we know that investors can have very long memories when it comes to this type of event. At the end of the day, the best way for anyone to gauge the viability and success of this company will come via commercial agreements, strategic partners, purchase orders, and revenue generation. Fortunately, we have a detailed timeline from Exro for this to occur, and we view the news release this AM as a strong signal that the company remains on track to hit those milestones previously identified.
CANADA RESEARCH PUBLISHED BY RAYMOND JAMES LTD.
MARCH 25, 2021 | 10:29 AM EDT COMPANY BRIEF
Strong Buy 1
Suitability*
MARKET DATA
Current Price (Mar-24-21) Market Cap (mln)
Current Net Debt (mln) Enterprise Value (mln) Shares Outstanding (mln) 30-Day Avg. Daily Value (mln) Dividend
Dividend Yield 52-Week Range
KEY FINANCIAL METRICS
1Q 2Q 3Q 4Q Revenue (mln) (C$, Dec FY)
C$3.14 C$407 C$(8) C$363 117.5 C$5.0 C$0.00 0.0% C$0.26 - C$7.55
A/ACC
2019A 2020E 2021E 2022E
0000
0A 0A 0A 0
0001
1234
2019A 2020E 2021E 2022E Revenue (mln) (C$, Dec FY)
EV/Revenue
EBITDA (mln) (C$, Dec FY) EV/EBITDA
0019 NM 40.1x (5) (9) (11) (10) NM NM NM NM
EPS (C$, Dec FY)
(0.07) (0.10) (0.10) (0.09)
Source: Thomson One, Raymond James Ltd. Quarterly figures may not add to full year due to rounding.
*Suitability categories changed 3/12/21. See disclosures for details.
Please read domestic and foreign disclosure/risk information beginning on page 3 and Analyst Certification on page 4.
RAYMOND JAMES LTD. | 2100 – 925 WEST GEORGIA STREET | VANCOUVER BC CANADA V6C 3L2
CANADA RESEARCH EXRO TECHNOLOGIES INC.
Exhibit 1: Exro Defined Milestones and Events
.
Source: Exro Technologies Inc.
PAGE 2 OF 9
CANADA RESEARCH EXRO TECHNOLOGIES INC.
COMPANY DESCRIPTION
Exro Technologies Inc. describes itself as an intelligent electrification company, with a specific focus on the inverter or power electronics in an electric vehicle. The company’s goal is to incorporate its power electronics technology into EV platforms in an effort to optimize performance, while also reducing weight and overall cost of the system.
C$8 C$7 C$6 C$5 C$4 C$3 C$2 C$1
03/20 06/20 09/20
EXRO.V TSX Venture
1200
1000
800
600
400
12/20 03/21
IMPORTANT INVESTOR DISCLOSURES
Unless otherwise specified, the term “Raymond James” shall denote, where appropriate, Raymond James & Associates, Inc. (RJA), Raymond James Ltd. (RJL), and their affiliates, subsidiaries and related entities.
Analyst Information
Analyst Compensation: Research analysts and associates at Raymond James are compensated on a salary and bonus system. Several factors enter into the compensation determination for an analyst, including: i) research quality and overall productivity, including success in rating stocks on an absolute basis and relative to the local exchange composite index and/or sector index; ii) recognition from institutional investors; iii) support effectiveness to the institutional and retail sales forces and traders; iv) commissions generated in stocks under coverage that are attributable to the analyst's efforts; v) net revenues of the overall Equity Capital Markets Group; and vi) comparable compensation levels for research analysts at competing peer firms.
Registration of Non-U.S. Analysts: The analysts listed on the front of this report who are not employees of, or associated with, RJA are not registered/qualified as research analysts under FINRA rules and are not subject to FINRA Rule 2241 restrictions on communications with covered companies, trading securities held by a research analyst account, and obligations related to identifying and managing conflicts of interest.
This global disclosure considers all entities of Raymond James and its affiliates. The jurisdiction where the analyst(s) is registered will determine what is permitted. For example, if the persons responsible for the content of this report are not licensed as research analysts in accordance with applicable rules promulgated by the regulatory organization(s) where this report is distributed, any client wishing to effect trades in any security should contact their Raymond James representative.
The analyst Michael Glen, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
Michael Glen of Raymond James Ltd. is a non-US Analyst
Company Specific Disclosures
Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors, including an assessment of industry size, structure, business trends, and overall attractiveness; management effectiveness; competition; visibility; financial condition; and expected total return, among other factors. Collectively, these factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences.
Target Prices: The information below indicates Raymond James’ target price and rating changes for any subject companies over the past three years.
PAGE 3 OF 9
CANADA RESEARCH EXRO TECHNOLOGIES INC.
Exro Technologies Inc. (EXRO.V) | Mar-24-21
I:MO2:$7.00 Dec-14-20
MO2:$9.00 Feb-22-21
SB1:$9.00 Mar-03-21
C$10.00 C$8.00 C$6.00 C$4.00 C$2.00
C$.00
Apr 18
Jul 18
Oct 18
Jan 19
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
Jul 20
Oct 20
Jan 21
S-Suspended NR-Not Rated R-Restricted UR-Under Review SB1-Strong Buy 1 MO2-Outperform 2 MP3-Market Perform 3 MU4-Underperform 4 Closing Price Price Target
Valuation Methodology Exro Technologies Inc.
Our valuation methodology is based on an EV/Revenue approach.
General Risk Factors
Following are some general risk factors that pertain to the businesses of the subject companies and the projected target prices and recommendations included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product/service pricing could change and adversely impact expected revenues and earnings; (2) issues relating to major competitors or market shares or new product expectations could change investor attitude toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation.
Company Specific Risk Factors
Exro Technologies Inc.
As we have looked to describe and highlight through this report, an investment in Exro has a substantial and significant number of risks attached to it. We describe some of these risks below, which are a combination of our own observed risks relative to our financial forecast and valuation approach, coupled with those offered by the company within its own financial disclosures.
Limited Operating History Including No Current Revenue Generation
Exro went public in mid-2017 via a reverse takeover (of a company named BioDE Ventures) and is subject to many of the risks common to early- stage enterprises. The Company is early-stage with a niche technology and currently pre-revenue. As such, Exro is subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and lack of revenues. Per our financial forecast, we have Exro first earning a small amount of revenue during 2H2021 with scaling from that point forward. No Guarantees on Broad-based Adoption of Technology
Within our diligence is speaking with automotive industry peers, Exro customers and management, we strongly believe that there is a substantial market opportunity for Exro’s inverter technology. That said, the company does remain in a test phase with pilot programs/demonstrations to be commenced more readily in 2021. The outcome of these trials is uncertain.
Technology Change and Rapid Pace of Technology Change
Given long lead times and development cycles, Exro’s technology and products may not meet market requirements or demands of the customer, including those relating to performance, integration, and total cost of ownership. Additionally, the electric mobility eco-system is seeing substantial amounts of investment and undergoing significant and rapid change. As such, a competing technology could emerge prior to Exro seeing broad-based commercialization and this may adversely impact the revenue forecast for the business. Additionally, there are no guarantees that Exro’s technology will see broad-based adoption or any given planned product from Exro may not meet current market standards (i.e., durability and reliability) once commercially available. Keeping products substantially advanced from a technology standpoint may also require significant unforeseen capital expenditures.
Heavy Dependence on Management
PAGE 4 OF 9
CANADA RESEARCH EXRO TECHNOLOGIES INC.
Given the extensive background and experience of CEO Sue Ozdemir and her efforts to build a team around, we would consider the CEO to be a key person in regards to the execution of Exro’s strategy and growth. Additionally, given Exro’s heavy dependence on its technology and intellectual property, we would consider the departure of any key staff as potentially presenting a competitive risk to the company.
Successful Ability to Execute Business Plan and Strategy
From an Exro perspective, our financial forecast assumes success in scaling production to a substantially higher level than current. Additionally, the company may face cost overruns in its development activity, and/or be unsuccessful in developing product for key growth markets.
Exro is also dependent on Original Equipment Manufacturers (OEMs) and other systems integrators (Tier 1 suppliers) to adopt their technology and deploy within appropriate platforms. Such dependence relies heavily on third-parties and their strategic commitments to pursuing electric vehicle product lines. Additionally, the testing and verification process for actual commercial deployment can be long and this could potentially impact the timelines to attain revenue generations and the longer-term path to positive EBITDA.
As well, given the early-stage nature of the global market for electric vehicles, there remain risks related to the longer-term acceptance and viability of the technology (although we strongly believe much of these concerns have been substantially de-risked in recent years).
Also, the success of Exro’s business plan is based on a number of assumptions and variables, many of which are not in the control of the company, such as ongoing support from various governments with respect to emission targets and the build out of electric vehicle infrastructure. Successful Ability to Raise Capital to Finance Ongoing Capital Spending and Research and Development
As described in our financial forecast section, we do not see Exro generating positive operating cash flow through until F2025E. That said, we estimate that Exro has cash reserves of ~$44.6 mln at 4Q20 with no debt. However, with the company not generating revenue at this time, there is no guarantee that Exro will not need to raise additional capital to reach its goals, targets, customer commitments, and future spending requirements. If the company is unable to raise additional capital on acceptable terms, this could have significant consequences for the growth outlook. Many of Exro’s Strategic Partners Can Be Considered Early-stage
While management has had success is securing eight commercial agreements across various verticals of the electric mobility landscape, we would note that most of these partners can be considered early-stage in nature. This is explained primarily by the early-stage nature of the electric mobility space and small overall market share that electric mobility platforms currently have within their respective end markets (i.e., passenger car, commercial truck, motorcycle, snow machine). That said, with continued momentum building with respect to electric mobility, we do anticipate that such market share will continue to grow over time and we will see Exro enter into commercial agreements with more substantial global mobility partners.
Global Macro-level Risks
Any significant global economic slowdown could have a significant impact on Exro’s business plan. Such risks may include escalating trade disputes and trade barriers, which could prevent Exro from selling certain regions deemed strategically important to the company. Additionally, Exro reports in CAD and we anticipate that a significant amount of sales (vast majority of sales) will be made to customers outside of Canada. As such, currency fluctuations versus USD or EUR could have a significant impact on financial results in any given period. Other macro level risks include political risk, adverse tax rules, and compliance with a wide variety of international laws. Additionally, emerging medical issues such as COVID-19 may adversely affect operations, suppliers, and customers.
Dependence on Intellectual Property and Ability to Protect Intellectual Property
Exro’s core products have a number of granted and pending patents in place, and there is also a significant amount of intellectual property with the products. Failure to protect existing intellectual property rights may result in the loss of exclusivity or right to use Exro technologies. The company relies on patent and copyright laws to protect intellectual property and some of Exro’s intellectual property is not covered by any patent or patent applications. Additionally, the defense of intellectual property may entail lawsuits, which can be expensive to litigate and of long duration.
Relationship Disclosures
Certain affiliates of Raymond James expect to receive or intend to seek compensation for investment banking services from all companies under research coverage within the next three months. The person(s) responsible for the production of this report declare(s) that, as far as they are aware, there are no relationships or circumstances (including conflicts of interest) that may in any way impair the objectivity of this recommendation directly or indirectly. This statement applies equally to any persons closely associated with him or her. However, it is possible that persons making communications in relation to a security may have a holding in that security and this will be disclosed. As stated, Raymond James has controls in place to manage such risks.
In the event that this is a compendium report (i.e., covers six or more subject companies), Raymond James may choose to provide specific disclosures for the subject companies by reference. To access these disclosures, clients should refer to: raymondjames.bluematrix.com/sellside/ Disclosures.action or call toll free at 1.800.237.5643 in the United States or 1.800.667.2899 in Canada. In other jurisdictions, please contact your local Raymond James’ representative.
PAGE 5 OF 9
CANADA RESEARCH
EXRO TECHNOLOGIES INC.
Company Name
Exro Technologies Inc. Exro Technologies Inc. Exro Technologies Inc.
Investor Disclosures
Disclosure
Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to the issuer.
Raymond James Ltd. has provided investment banking services within the last 12 months with respect to the issuer.
Raymond James Ltd. has received compensation for investment banking services within the past 12 months with respect to the issuer.
In the United States (or U.S.), RJA is registered with the Financial Industry Regulatory Authority (FINRA) as a member firm. RJA is responsible for the preparation and distribution of reports created in the United States. RJA is located at The Raymond James Financial Center, 880 Carillon Parkway, St. Petersburg, Florida 33716 (Raymond James Financial (RJF) Corporate Headquarters), 727.567.1000. Raymond James Financial Services, Inc. (RJFS) is registered with FINRA as a Member Firm. RJFS is located at the RJF Corporate Headquarters.
RJA non-U.S. affiliates, which are not FINRA member firms (with the exception of Raymond James (USA) Ltd.), include the following entities, which are responsible for the creation or distribution of reports in their respective areas:
In Canada, RJL is registered with the Investment Industry Regulatory Organization of Canada (IIROC) as a member firm. RJL is responsible for the preparation and distribution of reports created in Canada. RJL is located at Suite 2100, 925 West Georgia Street, Vancouver, BC V6C 3L2 (RJL Head Office), 604.659.8200. Raymond James (USA) Ltd. (RJLU) is registered with FINRA as a member firm, which is responsible for the distribution of reports created in Canada and the United States to both American clients living in Canada and Canadian clients living in the United States. RJLU is located at the RJL Head Office.
In the United Kingdom, Raymond James Financial International Ltd. (RJFI) and Raymond James Investment Services, Ltd. (RJIS) are authorised and regulated by the Financial Conduct Authority (FCA). RJFI and RJIS are located at Ropemaker Place, 25 Ropemaker Street, London, England, EC2Y 9LY, +44 203 798 5600.
This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in a locality, state, province, country, or other jurisdiction where such distribution, publication, availability, or use would be strictly prohibited or contrary to law or regulation. The securities discussed in this report may not be eligible for sale in some jurisdictions. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is not investment advice and does not constitute a personal recommendation, nor does it take into account the particular investment objectives, financial situations, or needs of individual clients. Information in this report should not be construed as advice designed to meet the individual objectives of any particular investor. Investors should consider this report as only a single factor in making their investment decision. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realized. Those losses may equal your original investment. Consultation with your Raymond James representative is recommended. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Nothing in this report constitutes investment, legal, accounting or tax advice or is a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation to you.
The information provided is as of the date above and is subject to change and may or may not be updated. This report should not be deemed a recommendation to buy or sell any security. Certain information has been obtained from third-party sources Raymond James considers reliable, but Raymond James does not guarantee that such information is accurate or complete. Persons within Raymond James may have information that is not available to the contributors of the information contained in this report. Raymond James, including affiliates and employees, may execute transactions in the securities listed in this report that may not be consistent with the ratings appearing in this report.
With respect to materials prepared by Raymond James, all expressions of opinion reflect the judgment of the Research Departments of Raymond James, or its affiliates, as of the date above and are subject to change. Raymond James may perform investment banking or other services for, or solicit investment banking business from, any company mentioned in this report.
Raymond James reports are disseminated and available to Raymond James clients simultaneously via electronic publication to Raymond James' internal proprietary websites (RJA: RJ Client Access & raymondjames.com; RJL: RJL ECM Client Access, RJL Retail Client Access & raymondjames.ca). Not all reports are directly distributed to clients or third-party aggregators. Certain reports may only be disseminated on Raymond James' internal proprietary websites; however, such reports will not contain estimates or changes to earnings forecasts, target price, valuation, or investment or suitability rating. Individual Raymond James associates may also opt to circulate published reports to one or more clients electronically. This electronic communication distribution is discretionary and is done only after the report has been publically disseminated via RJ's internal proprietary websites. The level and types of communications provided by Raymond James associates to clients may vary depending on various factors including, but not limited to, the client's individual preference as to the frequency and manner of receiving communications. For reports, models, or other data available on a particular security, please contact your Raymond James representative or financial advisor or visit for RJA: RJ Client Access & raymondjames.com; RJL: RJL ECM Client Access, RJL Retail Client Access & raymondjames.ca.
PAGE 6 OF 9
CANADA RESEARCH EXRO TECHNOLOGIES INC.
Raymond James’ policy is to update reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated in a report. Raymond James' policy is only to publish reports that are impartial, independent, clear, and fair and not misleading. Any information relating to the tax status of the securities discussed in this report is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional.
Links to third-party websites are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any third-party website or the collection or use of information regarding any website's users and/or members. Raymond James has not reviewed any such third- party websites and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to Raymond James’ own website material) is provided solely for your convenience and information, and the content of any such website does not in any way form part of this report. Accessing such website or following such link through this report or Raymond James’ website shall be at your own risk. Additional information is available on request.
All right, title, and interest in any Raymond James reports is the exclusive property of Raymond James Financial, Inc. and its affiliates, except as otherwise expressly stated. Raymond James® is the registered trademark of Raymond James Financial, Inc. All trademarks, service marks, slogans, logos, trade dress and other identifiers, third-party data and/or market data (“intellectual property”) displayed in the Raymond James reports are the property of Raymond James, or of other parties. The names of other companies and third-party products or services or other intellectual property mentioned in the Raymond James reports may be the copyright, trademarks, or service marks of their respective owners. U.S. and foreign copyright, trademark, common law rights and statutes protect this intellectual property. You are prohibited from using any intellectual property for any purpose including, but not limited to, use on other materials, in presentations, as domain names, or as metatags, without the express written permission of Raymond James or such other party that may own the marks.
Notice to RJA PCG Financial Advisors - Non-U.S. securities discussed in this report are generally not eligible for sale in the U.S. unless they are listed on a U.S. securities exchange. This report may not be used to solicit the purchase or sale of a security in any state where such a solicitation would be illegal. By accessing this report, you agree to not solicit the purchase or sale of any security mentioned in the report that is not listed on a U.S. securities exchange, or is not otherwise registered under applicable state Blue Sky laws. Furthermore, you acknowledge that you will be solely responsible for any and all costs associated with the rescission of trades in unregistered securities. Please contact the International Research Liaison with any questions at 727.567.5559.
Ratings and Definitions
RJA (U.S.) Definitions: Strong Buy (SB1) The security is expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) The security is expected to appreciate or outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where Raymond James is comfortable with the relative safety of the dividend and expects a total return modestly exceeding the dividend yield over the next 12-18 months. Market Perform (MP3) The security is expected to perform generally in line with the S&P 500 over the next 12 months and could potentially be used as a source of funds for more highly rated securities. Underperform (MU4) The security is expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The security’s rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable or to comply with applicable regulations or firm policies in certain circumstances. When a security’s research coverage has been suspended, the previous rating and price target are no longer in effect for this security, and they should not be relied upon.
RJL (Canada) Definitions: Strong Buy (SB1) The security is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six to 12 months. Outperform (MO2) The security is expected to appreciate and outperform the S&P/ TSX Composite Index over the next 12-18 months. Market Perform (MP3) The security is expected to perform generally in line with the S&P/ TSX composite Index over the next 12 months and could potentially be used as a source of funds for more highly rated securities. Underperform (MU4) The security is expected to underperform the S&P/TSX Composite Index or its sector over the next six to 12 months and should be sold. Suspended (S) The security’s rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable or to comply with applicable regulations or firm policies in certain circumstances or may otherwise have a perceived conflict of interest. When a security’s research coverage has been suspended, the previous rating and price target are no longer in effect for this security, and they should not be relied upon.
PAGE 7 OF 9
CANADA RESEARCH
EXRO TECHNOLOGIES INC.
Strong Buy and Outperform (Buy) Market Perform (Hold) Underperform (Sell)
* Columns may not add to 100% due to rounding.
RJA Suitability Ratings (SR)
Coverage Universe Rating Distribution* RJA RJL
60% 76%
37% 23%
3% 2%
Investment Banking Relationships RJA RJL 25% 36% 15% 16%
4% 0%
Moderate Risk/Provide Income (M/INC) Larger capitalization, lower volatility (beta) equities of companies with sound financials, consistent earnings, and dividend yields meaningfully above that of the S&P 500. Many securities in this category are structured with a focus on providing a consistent dividend or return of capital. Moderate Risk/Wealth Accumulation (M/ACC) Larger capitalization equities of companies with sound financials, consistent earnings growth, the potential for long-term price appreciation, and often a dividend yield. Moderately Aggressive Risk/Provide Income (MA/INC) Generally equities of companies that are structured with a focus on providing a dividend meaningfully above that of the S&P 500. These companies typically feature sound financials, positive earnings, and the potential for long-term price appreciation. Moderately Aggressive Risk/Wealth Accumulation (MA/ACC) Generally equities of companies in fast growing and competitive industries with less predictable earnings (or losses), potentially more leveraged balance sheets, rapidly changing market dynamics, and potential risk of principal. Aggressive Risk/Provide Income (A/INC) Generally equities of companies that are structured with a focus on providing a meaningful dividend but may face less predictable earnings (or losses), more leveraged balance sheets, rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and meaningful risk of loss of principal. Securities of companies in this category may have a more volatile income stream from dividends or distributions of capital. Aggressive Risk/Wealth Accumulation (A/ACC) Generally equities of companies with a short or unprofitable operating history, limited or less predictable revenues, high risk associated with success, high volatility (beta), potential significant financial or legal issues, and the meaningful risk of loss of principal.
RJL Suitability Ratings
RJL has developed a proprietary algorithm for risk rating individual securities. The algorithm utilizes data from multiple vendors, and all data is refreshed at least monthly. Accordingly, suitability ratings are updated monthly. The suitability rating shown on this report is current as of the report's published date. In the event that a suitability rating changes after the published date, the new rating will not be reflected until the analyst publishes a subsequent report.
International Disclosures
For clients of RJA: Any foreign securities discussed in this report are generally not eligible for sale in the United States unless they are listed on a U.S. exchange. This report is being provided to you for informational purposes only and does not represent a solicitation for the purchase or sale of a security in any state where such a solicitation would be illegal. Investing in securities of issuers organized outside of the United States, including ADRs, may entail certain risks.
The securities of non-U.S. issuers may not be registered with, nor be subject to, the reporting requirements of the U.S. Securities and Exchange Commission. There may be limited information available on such securities. Investors who have received this report may be prohibited in certain states or other jurisdictions from purchasing the securities mentioned in this report. Please ask your RJA financial advisor for additional details and to determine if a particular security is eligible for purchase in your state.
For clients of RJFS: This report was prepared and published by Raymond James and is being provided to you by RJFS solely for informative purposes. Any person receiving this report from RJFS should direct all questions and requests for additional information to their RJFS financial advisor.
For clients of RJL: In the case where there is Canadian analyst contribution, the report meets all applicable IIROC disclosure requirements. RJL is a member of the Canadian Investor Protection Fund.
For clients of RJFI: This report is prepared for and distributed by RJFI, and any investment to which this report relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (High net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not intended for private individuals or those who would be classified as retail clients.
For clients of RJIS: This report is prepared for and distributed by RJIS, and is for the use of professional investment advisers and managers and is not intended for use by retail clients.
For purposes of the FCA requirements, this report is classified as independent with respect to conflict of interest management. RJFI and RJIS are
PAGE 8 OF 9
CANADA RESEARCH EXRO TECHNOLOGIES INC.
authorised and regulated by the FCA.
For clients of Raymond James Euro Equities (RJEE): RJEE is authorised and regulated by the Autorite de Controle Prudentiel et de Resolution and the Autorite des Marches Financiers. As of 30 November, 2020, RJEE is an unaffiliated entity of Raymond James. RJEE is located at SAS, 45 Avenue George V, 75008, Paris, France, +33 1 45 61 64 90. This report is prepared for and distributed by RJEE pursuant to an agreement with Raymond James, and any investment to which this report relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in "Code Monetaire et Financier" and Reglement General de l'Autorite des Marches Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not intended for private individuals or those who would be classified as retail clients.
For recipients in Brazil: This is a strictly privileged and confidential communication between Raymond James & Associates and its selected clients. This communication contains information addressed only to specific individuals in Brazil and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any investment opportunities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any investment opportunities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute, or copy this communication. Please notify the sender immediately if you have mistakenly received this communication.
The investments analyzed in this report may not be offered or sold to the public in Brazil. Accordingly, the investments in this report have not been and will not be registered with the Brazilian Securities and Exchange Commission (Comisso de Valores Mobilirios, the “CVM”), nor have they been submitted to the foregoing agency for approval. Documents relating to the investments in this report, as well as the information contained therein, may not be: (i) supplied to the public in Brazil, as the offering of investment products is not a public offering of securities in Brazil; nor (ii) used in connection with any offer for subscription or sale of securities to the public in Brazil.
For clients in Australia: Despite anything in this report to the contrary, this report is prepared for and distributed in Australia by RJFI with the assistance of RJA, and RJA at times will act on behalf of RJFI. This report is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. You represent and warrant that if you are in Australia, you are a “wholesale client”. This research is of a general nature only and has been prepared without taking into account the objectives, financial situation, or needs of the individual recipient. RJFI and RJA do not hold an Australian financial services license. RJFI is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) in respect of financial services provided to Australian wholesale clients under the exemption in ASIC Class Order 03/1099 (as continued by ASIC Corporations (Repeal and Transitional) Instrument 2016/396). RJFI is regulated by the UK FCA under UK laws, which differ from Australian laws. RJA is acting on behalf of RJFI with respect to distribution and communications related to this report.
For clients in New Zealand: In New Zealand, this report is prepared for and may only be distributed by RJFI to persons who are wholesale clients pursuant to Section 5C of the New Zealand Financial Advisers Act 2008.
Proprietary Rights Notice
By accepting a copy of this report, you acknowledge and agree as follows:
This report is provided to clients of Raymond James only for your personal, noncommercial use. Except as expressly authorized by Raymond James, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate, or commercially exploit the information contained in this report, in printed, electronic, or any other form, in any manner, without the prior express written consent of Raymond James. You also agree not to use the information provided in this report for any unlawful purpose.
This report and its contents are the property of Raymond James and are protected by applicable copyright, trade secret or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec. 501 et. seq., provides for civil and criminal penalties for copyright infringement. No copyright claimed in incorporated U.S. government works.
© 2021 Raymond James Financial, Inc. All rights reserved.
© 2021 Raymond James & Associates, Inc.
© 2021 Raymond James Ltd., Member Canadian Investor Protection Fund
PAGE 9 OF 9