Exro's Interest Payments: Navigating Debt Obligations and Growth Opportunities

Exro Technologies Inc. (TSX: EXRO, OTCQB: EXROF), a leading clean-technology company specializing in new generation power-control electronics, recently provided an update on its semi-annual interest payments on outstanding convertible debentures. This article explores the implications of these payments on Exro's cash flow, debt-to-equity ratio, and growth prospects.

Exro's convertible debentures, totaling C$15,000,000, bear an interest rate of 12% per annum, payable semi-annually. This high interest rate reflects the higher risk associated with convertible debentures and Exro's relatively low credit rating. The company is obligated to make interest payments of C$750,000 every six months, which significantly impacts its cash flow projections.

The first interest payment of C$750,000, due on June 30, 2023, represents approximately 15% of Exro's projected 2023 revenue (C$20,000,000). The second payment, due on December 31, 2023, is more substantial, accounting for nearly 25% of the projected revenue. These payments highlight the importance of effective cash flow management for Exro to meet its financial obligations while continuing to invest in growth and innovation.



Exro's interest payments also have a notable impact on its debt-to-equity ratio. Assuming Exro's equity remains constant, each C$750,000 interest payment increases its debt-to-equity ratio by approximately 0.5%. If its total debt is C$30,000,000, the ratio will rise from 1.5 to 2.0 by the end of 2024, assuming no additional debt or equity issuance.



Exro's semi-annual interest payments also influence its ability to invest in research and development, as well as expansion opportunities. The C$1,500,000 in interest expenses every six months is a significant financial commitment that impacts Exro's cash flow. However, by maintaining a strong financial position and managing its debt obligations, Exro can continue to invest in its core technologies and pursue growth opportunities.

In conclusion, Exro's semi-annual interest payments on its outstanding convertible debentures present both challenges and opportunities for the company. Effective cash flow management, strategic debt-to-equity ratio monitoring, and a commitment to growth and innovation will be crucial for Exro to navigate these obligations and capitalize on its potential. As Exro continues to develop its technology and expand its customer base, it is essential to maintain a balanced approach to debt management and growth opportunities.