Q4 2021 AYRO Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by.

Ladies and gentlemen, thank you for standing by.

Good morning and welcome to the Arrow, Inc. fourth quarter and year-end 2021 Financial Results and Corporate Update conference call.

Good morning, and welcome to the Arrow, Inc, fourth quarter and year end 2021 financial results and corporate update conference call.

At this time all participants are in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question.

At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two.

Please press Star then two.

Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately 1 hour after the end of the call through June 23rd, 2022.

Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour. After the end of the call through June 20, <unk> 2002.

Two.

I would now like to turn the call over to Scott Gordon of CoreIR, the company's investor relations firm. Please go ahead, sir.

I would now like to turn the call over to Scott Gordon of core IR, The company's Investor Relations firm. Please go ahead Sir.

Okay.

Thank you Andrew Good morning, and thank you for participating in today's conference call.

Scott Gordon: Thank you, Andrew. Good morning, and thank you for participating in today's conference.

Joining me familiar with his leadership team are Tom wouldn't Schlanger, Chief Executive Officer, Dave Collins work interim Chief Financial Officer.

Scott Gordon: Joining me from ARO's leadership team are Tom Wittenschlager, Chief Executive Officer, and Dave Hollingsworth, Interim Chief Financial Officer.

During this call management will be making forward looking statements, including statements that address <unk> expectations for future performance or operational results.

Scott Gordon: During this call, management will be making forward-looking statements, including statements that address ARO's expectations for future performance or operational results.

Scott Gordon: Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

These statements involve risks and other factors that may cause actual results to differ materially from those statements.

Scott Gordon: For more information about these risks, please refer to the risk factors described in ARO's most recently filed periodic report.

For more information about these risks please refer to the risk factors described in areas. Most recently filed periodic reports on Form 10-K filed with the SEC.

Scott Gordon: And there was press release that accompanies this call, particularly the cautionary statement in it.

It was a press release that accompanies this call, particularly the cautionary statements in it.

Today's conference call includes adjusted EBITDA a non.

Scott Gordon: Today's conference call includes adjusted EBITDA, a non-GAAP financial measure that ARO believes can be useful in evaluating its performance.

non-GAAP financial measure, but he really believes can be useful in evaluating its performance you should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Scott Gordon: You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Scott Gordon: for a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure.

For a reconciliation of this non-GAAP financial measure to net loss.

Loss its most directly comparable GAAP financial measure. Please see the reconciliation table located in April's earnings press release, which is available on its website at www Dot dot com under the Investor tab.

Scott Gordon: Please see the reconciliation table located in ARO's earnings press release, which is available on its website at www.aro.com under the Investor tab.

Scott Gordon: The content of this call contains time-sensitive information that is accurate only as of today, March 23, 2022.

The content of this call contains time sensitive information that is accurate only as of today March 23 2022.

Scott Gordon: Except as required by law, ARO disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Tom Rentschleger. Tom, please go ahead.

Except as required by law <unk> disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.

My pleasure to turn the call over to accomplish like Tom. Please go ahead.

Thanks, Scott and good morning to everyone on the call.

Tom Rentschleger: I'd like to use this call as a way of recapping the past six months since I took the helm as CEO of Aero.

To use this call to waive recapping the past six months since I took the helm as CEO of Arrow and.

Tom Rentschleger: and to provide some insight into what we believe 2022 holds for us.

And to provide some insight into what we believe 2022 holds for us in many ways. The fourth quarter was one of transition corporate and strategic review and planting the seeds of our future success of course that does not mean, we shifted our attention away from sales of our existing product. The club car current low speed electric utility truck.

Tom Rentschleger: In many ways, the fourth quarter was one of transition, corporate and strategic review, and planting the seeds of our future success.

Tom Rentschleger: Of course, that does not mean we shifted our attention away from sales of our existing product, the Club Car Current, a low-speed electric utility truck. In fact, it was entirely the opposite.

In fact, it was entirely the opposite as we recognized record revenue from record unit sales of the current our efforts are also supported by a very strong balance sheet with $69 2 million in cash and no debt.

Tom Rentschleger: as we recognize record revenue from record unit sales of the current.

Tom Rentschleger: Our efforts are also supported by a very strong balance sheet with $69.2 million in cash and no debt.

Arrow is a leader in the low speed electric vehicle market, which is a subset of the larger low speed market forecast to grow to $6 3 billion by 2025.

Speaker Change: Arrow is a leader in the low-speed electric vehicle market, which is a subset of the larger low-speed market forecast to grow to $6.3 billion by 2025. After joining Arrow as CEO in September 2021, I evaluated the state of the company and the electric vehicle industry.

After joining arrow as CEO in September 2021 are evaluated the state of the company and the electric vehicle industry. It became apparent that sensors much less competition in the CEB segment and no clearly identifiable leader nor large manufacturers poised to enter this segment.

Speaker Change: It became apparent that since there's much less competition in the LSEV segment and no clearly identifiable leader, nor large manufacturers poised to enter this segment, the LSEV market was extremely attractive.

The L. A CBD market was extremely attractive.

Speaker Change: These are critical factors that led to our decision to emphasize the LSEV market over the high-speed EV market, which Arrow previously intended to address with the 311X.

These are critical factors that led to our decision to emphasize the L. S. C b market over the high speed EV market, which arrow previously intended to address with the 311 Ax. However was also apparent the current supply chain for our vehicles had to be modified to maximize the value we could achieve in the yellow CV market.

Speaker Change: However, it was also apparent the current supply chain for our vehicles had to be modified to maximize the value we could achieve in the LSEV market. Sourcing our components for the club car current from our supplier in China via trans-Pacific shipment is a slow process that has seen both rising shipping costs as well as West Coast port delays that have plagued the global supply chain for months.

Sourcing our components for the club car current from our supplier in China via a transpacific shipment is a slow process that has seen both rising shipping costs as well as west coast Port delays that have plagued the global supply chain for months.

Speaker Change: So, we set out to develop a new supply chain with heavy emphasis on North American sourcing to mitigate the increased expenses, delays, and associated risks.

We set out to develop a new supply chain with heavy emphasis on north American sourcing to mitigate the increased expenses delays and associated risks that have now become all too common in the global economy.

Speaker Change: that have now become all too common in the global economy.

Speaker Change: In tandem with this new supply chain, we decided in December to develop a next generation model year 2023 refresh to the club car current, which we now refer to as the Aero Z.

Tandem with this new supply chain, we decided in December to develop a next generation model year 2023 refresh to the club car current which we now referred to as the Ara C. This new model is expected to be ready to launch by year end 2022, and should feature major technology upgrades over the current Furthermore, our.

Speaker Change: This new model is expected to be ready to launch by year-end 2022 and should feature major technology upgrades over the current.

Speaker Change: Furthermore, our goal is to develop an Arrow Z model refresh each successive year in order to stay at the innovation forefront in the LSEV market.

Goal is to develop an arrow C model refresh each successive year in order to stay at the innovation forefront in the yellow CV market when fleet buyers arena managers' colleges and universities or municipalities have a need for a sustainable utility vehicle in any of our multitude of payload configurations, we want them to.

Speaker Change: When fleet buyers, arena managers, colleges and universities, or municipalities have a need for a sustainable utility vehicle in any of a multitude of payload configurations, we want them to have every reason to consider only aero vehicles.

I have every reason to consider only arrow vehicles.

Speaker Change: We also want federal and state agencies to consider using the Aero Z utility vehicle as well. So we intend to have it included on the federal GSA schedule beginning in the fourth quarter of 2022. So it can be purchased by these government agencies. The government is a huge untapped market.

We also are in federal and state agencies to consider using the arrows utility vehicle as well. So we intend to have it included on the federal GSA schedule beginning in the fourth quarter of 2022. So it can be purchased by these government agencies.

The government is a huge untapped market for arrow.

Speaker Change: as it has sustainability and green goals in many of its applications and agencies. And those are needs we'd like to fulfill. Our platform would offer an attractive solution meeting both sustainability objectives as well as Buy American contract requirements of the federal government.

It has sustainability and green goals and many of its applications in agencies and those who needs we'd like to fulfil our platform would offer an attractive solution meeting both sustainability objectives as well as by American contract requirements of the federal government.

Speaker Change: We also intend to offer food box architecture and configuration solutions and other enabling technology infrastructure, such as telematics, logistics support, and route optimization for the AeroSea that will be necessary in food delivery applications.

We also intend to offer food box architecture, and configuration solutions and other enabling technology infrastructure, such as telematics logistics support and route optimization for the <unk> that will be necessary in food delivery applications. There are many urban environments, where low speed vehicles are well suited to delivering food from restaurants.

Speaker Change: There are many urban environments where low-speed vehicles are well suited to delivering food from restaurants due to relatively low speed limits.

Due to relatively low speed limits.

Speaker Change: Our existing partnerships with Club Car, Gallery Carts, and Element Fleet Management should help us penetrate this segment, and our goal is to have such an ancillary product portfolio extensions available to launch at the same time as the launch of the Aero Z vehicle itself.

Our existing partnerships with club car Gallery cards at element fleet management should help us penetrate this segment and our goal is to have such and such an ancillary product portfolio extensions available to launch at the same time, it's a lots of the arrows E vehicle itself.

Speaker Change: So we have not eliminated the innovation and R&D aspects of our corporate and product development. Instead, we have chosen a more targeted approach to R&D that is laser-focused on running at startup speed to reach the market with a model refresh version of the current that is anticipated to offer more technology advances and more payload.

So we have not eliminated the innovation and R&D aspects of our corporate and product development. Instead, we have chosen a more targeted approach to R&D that is laser focused on running at start up speed to reach the market with a model refresh version of the current that is anticipated to offer more technology advances.

And more payload configurations and be available for government direct purchase all with a more localized and predictable supply chain. We will of course expand upon our strategy and progress on the <unk> development over time, but this should hopefully give everyone. A good idea on the direction Arrow is headed and the associated timing.

Speaker Change: and be available for government direct purchase, all with a more localized and predictable supply chain.

Speaker Change: We will, of course, expand upon our strategy and progress on the Arrow seed development over time. But this should hopefully give everyone a good idea on the direction Arrow is headed and the associated timing for future model year and new product rollouts.

For future model year, and new product Rollouts now I'd like to turn to our financial performance in the fourth quarter of 2021.

Speaker Change: Now I'd like to turn to our financial performance in the fourth quarter of 2021.

Speaker Change: As I previously indicated, we enjoyed record quarterly revenue of $813,000, up 4% year-over-year and 45% sequentially on record unit deliveries. Based on our current projections, we expect revenue to be up sequentially and set records once again in each of the first and second quarters of 2022.

As I previously indicated we enjoyed record quarterly revenue of $813000 up 4% year over year and 45% sequentially on record unit deliveries based on our current projections, we expect revenue revenue to be up sequentially and set records once again in each of the first and second quarters.

2020 to.

Speaker Change: Due in part to some cost containment measures that began in the fourth quarter, net loss improved sequentially from the third quarter by 35 percent. Even as we began the development of the Aero Z vehicle in December , aligning our cost structure with our revenue and strategic focus is of the utmost importance.

Due in part to some cost containment measures that began in the fourth quarter net loss improved sequentially from the third quarter by 35%, even as we began the development of the arrows E vehicle in December aligning our cost structure with our revenue and strategic focus is of the utmost importance.

Speaker Change: And we expect continued sequential improvement in EBITDA and net loss in the first quarter of 2022 due to reduced headcount, the elimination of many manufacturing, engineering, and marketing consultants previously employed by the company, and eliminating generally unnecessary expenses across the board.

And we expect continued sequential improvement in EBITDA and net loss in the first quarter of 2022 due to reduced head count be elimination of many manufacturing engineering at marketing consultants previously employed by the company.

And eliminating generally unnecessary expenses across the board.

Speaker Change: Even as we're cutting many costs and expect to sequentially narrow our net loss in each of the first and second quarters of 2022, we will be accelerating our rate of product development for the AeroZee and its product extension.

Even as we're cutting many costs and expect to sequentially narrower net loss in each of the first and second quarters of 2022, we will be accelerating our rate of product development for the <unk> and its product extensions.

Speaker Change: Lastly, at December 31st, 2021, we had a cash balance of $69.2 million and we're doing all we can to carefully manage our expenses to maintain our strong balance.

Lastly at December 31, 2021, we had a cash balance of $69 $2 million and we're doing all we can to carefully manage our expenses to maintain our strong balance sheet, having said that we are evaluating other potential strategic M&A opportunities in the EV market that could be accretive beyond.

Speaker Change: Having said that, we are evaluating other potential strategic M&A opportunities in the EV market that could be accretive beyond our internal strategic efforts.

Our internal strategic efforts, while we are not committed to growing inorganically. It is an avenue that we're certainly exploring.

Speaker Change: While we are not committed to growing inorganically, it is an avenue that we are certainly exploring.

That concludes my opening remarks, the general theme I hope investors takeaway from this discussion is that there is a lot going on at the company under the Hood that may not be evident however, we fully intend to share our progress with investors as corporate events continue to unfold.

Speaker Change: That concludes my opening remarks. The general theme I hope investors take away from this discussion is that there is a lot going on at the company under the hood that may not be evident. However, we fully intend to share our progress with investors as corporate events continue to unfold.

Speaker Change: Now I'd like to turn the call over to Dave Hollingsworth who will review our financial results.

Now I'd like to turn the call over to Dave Hollingsworth, who will review our financial results Dave.

Dave Hollingsworth: Thanks, Dom, and good morning, everyone. Here's a summary of our fiscal fourth quarter 2021 financial results. Revenue for the fourth quarter ended December 31st, 2021 was $813,291, an increase of 4% year over year and an increase of 45% sequentially.

Thanks, Tom and good morning, everyone. Here's a summary of our fiscal fourth quarter 2021 financial results revenue for the fourth quarter ended December 31, 2021 was 813291, an increase of 4% over year over year, and an increase of 7% to 45% sequentially.

Dave Hollingsworth: The increased revenue is attributable to the increased unit sales and deliveries of the club car currently.

The increased revenue was attributable to increased unit sales and deliveries of the club car current.

Cost of sales in the fourth quarter was $274 million and includes approximately $1 seven 8 million in one time costs required by good accounting practice and associated with our shift to a north American based manufacturing and supply chain strategy that will not reoccur in future quarters.

Dave Hollingsworth: Cost of sales in the fourth quarter was $2.74 million and includes approximately $1.78 million in one-time costs required by good accounting practice and associated with our shift to a North American-based manufacturing and supply chain strategy that will not reoccur in future quarters.

Dave Hollingsworth: Total operating expense in the fourth quarter were approximately $5.2 million as compared to $11.6 million in the third quarter of 2021.

Total operating expense in the fourth quarter were approximately $5 2 million as compared to $11 6 million in the third quarter of 2021.

Dave Hollingsworth: The decrease in total operating expense is due to reduced general spending implemented during the corporate and strategic review by senior management that was put in place at the end of September 2021, as well as a decrease in stock-based compensation expense.

The decrease in total operating expense is due to reduced general spending implemented during the corporate and strategic review by senior management that was put in place at the end of September 2021, as well as a decrease in stock based compensation expense.

Dave Hollingsworth: The company expects an additional sequential reduction in ongoing operating expenses even with one-time severance costs in the first quarter of 2022 driven by an overall repositioning of engineering, design, and manufacturing partnerships.

The company expects an additional sequential reduction in ongoing operating expenses, even with one time <unk> costs in the first quarter of 2022, driven by an overall repositioning of engineering design and manufacturing partnerships.

Adjusted EBITDA, a non-GAAP measure was a loss of $7 1 million in the fourth quarter, which was a sequential improvement of approximately $1 1 million compared to the third quarter 2021 EBITDA.

Dave Hollingsworth: Adjusted EBITDA, a non-gap measure, was a loss of $7.1 million in the fourth quarter, which was a sequential improvement of approximately $1.1 million compared to the third quarter 2021 EBITDA. Net loss in the fourth quarter

Net loss in the fourth quarter was $7 8 million, which was an improvement from the net loss of $12 million in the third quarter 2021, the improved net loss in the fourth quarter is attributable to the aforementioned decrease in general expenses. Following management's strategic review and implementation of cost reduction measures as well as a decrease in stock based.

Dave Hollingsworth: which was an improvement from the net loss of $12 million in the third quarter 2021.

Dave Hollingsworth: The improved net loss in the fourth quarter is attributable to the aforementioned decrease in general expenses following management's strategic review and implementation of cost reduction measures, as well as a decrease in the stock-based compensation from the third quarter to the fourth.

<unk> from the third quarter to the fourth quarter.

Dave Hollingsworth: Cash at December 31, 2022 was $69.2 million versus $77.1 million at the end of the third quarter of 2021. The quarterly cash burn accounts...

Cash at December 31, 2022 was $69 2 million versus $77 1 million at the end of the third quarter 2021, the quarterly cash burn accounts for the cash decline.

Dave Hollingsworth: Total debt was zero at December 31, 2021, as it was in September 30, 2021, and as of December 31, 2020, the company had 36,866,956 common shares out there.

Total debt was zero at December 31, 2020, as it was in September 32021, and as of December 31, 2020. The company had 36.866 million 956 common shares outstanding.

Dave Hollingsworth: That concludes my prepared remarks, and I'd like to turn the call back over to Tom for his remaining remarks.

That concludes my prepared remarks, and I'd like to turn the call back to Tom for remaining remarks.

Thank you Dave.

As I've indicated we have lofty goals in 2022.

Tom: As I've indicated, we have lofty goals in 2022.

Tom: Not every team can attempt to pull off a new vehicle design and manufacturing schedule over the course of 12 months.

Not every team can attempt to pull off a new vehicle design and manufacturing.

And your fracturing schedule over the course of 12 months.

However that is exactly our objective with the <unk> as we expect to be in position to launch it by the end of the year. We believe that we have the necessary automotive and <unk> experience to make this happen with an aggressive design schedule and a materially reduce development cost so.

Tom: However, that is exactly our objective with the AeroC, as we expect to be in position to launch it by the end of the year.

Tom: We believe that we have the necessary automotive and EV experience to make this happen with an aggressive design schedule and a materially reduced development cost.

Tom: So it'd be a great milestone and a great way to end 2022. Moreover, as I mentioned earlier, we expect sequentially higher revenue in each of the next two quarters and a leaner and more efficient operating structure at the company to protect our strong balance sheet.

So it would be a great milestone and a great way to end in 2022.

Moreover, as I mentioned earlier, we expect sequentially higher revenue in each of the next two quarters and a leaner and more efficient operating structure at the company to protect our strong balance sheet I'd.

Speaker Change: I'd like to thank all our shareholders for their support, and I look forward to sharing additional accomplishments and developments as they unfold.

I'd like to thank all our shareholders for their support and I look forward to sharing additional accomplishments and developments as they unfold.

Speaker Change: With that said, I'd like to turn the call over to the operator so we can begin the question and answer session.

With that said I'd like to turn the call over to the operator. So we can begin the question and answer session operator.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys is that any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Barry Sine with Spartan capital Securities.

Speaker Change: The first question comes from Barry Sine with Spartan Capital Securities.

Please go ahead.

Barry Sine: uh... hey uh... good morning a couple questions if you don't mind uh... first of all i guess the highlight is a very good top line number very good sales what's going on there is a club car doing something different are they doing promotions are these orders that have long been in the pipeline and you know you're also uh... guiding to even better uh... results going forward so club cars your exclusive i believe still on the four eleven so something good must be going on there very good morning good here

Hey, good morning, a couple of questions. If you don't mind first of all I guess my highlight is a very good topline number very good sales.

What's going on there is that club car doing something different and are they doing promotions are these orders that have long been in the pipeline and you're also guiding to even better results going forward. So club cars. Your exclusive I believe still on the 411, so something good must be going on there.

Very good morning, good hearing from you.

Yeah.

Speaker Change: The answer to your question is that we continue to work very, very closely with ClubCar, and we are seeing very good response from the ClubCar dealer network. We're seeing very good response from our partner, Gallery, and of course, Element is in the play in the larger strategic plays. But we've seen excellent sell-through with our partner, ClubCar, and obviously with the Aero-X.

The answer to your question is so we continue to work very very closely with club car.

And we are we are seeing very good response from the club car dealer network. We're seeing very good response from our partner Gallery and of course element is in the play in the larger strategic plays but we've seen excellent sell through.

With our partner club car.

And obviously with with the Arrow X.

Speaker Change: Release we're seeing a fairly good response to the product flowing through the channel So we certainly expect

Release were seeing fairly good response to the product flowing through the channel.

So we certainly expect.

Speaker Change: As we mentioned in our comments, we expect to see that momentum continue certainly into the first two quarters of this year.

As we as we mentioned in our comments, we expect to see that momentum continue certainly in.

To the first two quarters of this year.

Okay, and then on expenses I guess, the first area I want to talk about is what's the current status are you still making them at karma or have you moved to round rock what exactly was that $1 seven to 8 million inventory charge and one of the initiatives.

Speaker Change: Okay, and then on expenses, I guess the first area I want to talk about...

Speaker Change: is what's the current status? Are you still making them at Karma or have you moved to Round Rock?

Speaker Change: What exactly was that $1.78 million inventory charge? And one of the initiatives I know you've talked about is getting more units in a shipping container. So where are we on that?

You've talked about is getting more units in a shipping container. So where are we on that and then is there still more in the pipeline to come in future quarters in terms of you know me.

Speaker Change: is there still more in the pipeline to come in future quarters in terms of you know moving back towards a positive growth

Moving back towards a positive gross margin.

Speaker Change: Okay, well, those are a lot of questions, Barry, but let me take, let me take the first.

Okay, well those are a lot of questions Barry, but let me take.

Let me take the first first one and then turn it over to Dave for an explanation of the $1 seven eight and then I'll try to circle back.

Speaker Change: First one and then turn it over to Dave for an explanation of the 1.78 and then I'll try to circle back at your other questions, so First things first. Yes, we are building a building units

At your other question so far.

First things first yes, we are building a building units as we speak at Karma Karma is doing a very good job of doing so.

Dave Hollingsworth: as we speak at Karma. Karma is doing a very good job of doing so. Our supply chain at this point in time is unchanged. Obviously, we're placing tremendous emphasis through our sustaining engineering efforts on product quality, so what we sent to Clubcar is the very best it can possibly be.

Our supply chain at this point in time is unchanged, obviously, we're placing tremendous emphasis through our sustaining engineering efforts on product quality. So what we center club car, so very best it can possibly be.

<unk>.

Speaker Change: Let me ask David to address the 1.78 question. Yeah, thanks.

Let me ask David to address the 178 question.

Thanks Barry.

Sure.

David: I want to first disclose that this is broken out in our 10 cases that was filed today at 830. So you'll be able to see some more detail into that $1.78 million and breaking it out.

Wanted to first disclosed. This these this is broken out entertainment that was filed today at 830 to be able to see some more detail into that $1 $7 million to $8 million of breaking it out the bulk of it was a net present value adjustment.

David: The bulk of it was a net present value adjustment due to the freight cost coming in from China.

Due to the freight costs coming in from China.

David: They've just been much more massive than we could sustain going into 2022 So as as is correct and correct counting procedures we wrote down That freight expense of just over 1 million dollars

They've just been much more massive than we can sustain going into 2022.

So as it is correct.

Our accounting procedures, we wrote down.

That freight expense of just over $1 million.

David: We also had adjustments to some of our prepaid accounts.

We also had adjustments to some of our prepaid accounts.

David: needed to be brought to a more

Needed to be brought to a more.

Consistent accounting for what we actually have in prepaid.

David: Consistent accounting for what we actually have in prepaid and then as well as a karma reduction due to Difference of vehicles that we'll be producing here

And then as well as at Karma reduction due to a difference of vehicles that will be producing here and in 2022 from the original contract amount.

David: 2022 from the original contract amount that was disclosed last year. So those are the three components, and like I said, there's a little bit more information you can see in the 10-K that I've disclosed.

That was disclosed last year. So those are the three components and like I said, there's a little bit more information you can see in the 10-K.

<unk>.

Okay Barry.

Speaker Change: Okay, Barry, last but not least, as to your question on unexpected margin performance and expected sell-through performance.

As to last but not least as tier your question on <unk>.

Unexpected.

Margin performance than expected sell through performance.

Speaker Change: As we mentioned in the prepared comments, we expect to continue to see momentum building in our sell through. We currently have a

As we mentioned in the prepared comments, we expect to.

Continued to see momentum building in our sell through we currently have a.

A fair amount of inventory.

Speaker Change: a fair amount of inventory in hand, on shore, or on the water. So fundamentally, our focus for now is taking that inventory and preparing it appropriately for sell-through and then conducting sell-through, obviously in conjunction with ClubCart and Gallery and or Element. As for the margin question.

In hand onshore.

Or on the water so fundamentally our focus for now is taking that inventory and preparing it appropriately for sell through and then conducting sell through.

Obviously in conjunction with club car and gallery <unk> element.

As for the margin question.

Speaker Change: Dave and I haven't at all completed the task of expense rationalization and cost reduction We

Dave and I haven't at all completed the task of expense rationalization and cost reduction.

We continue down that path and so.

Speaker Change: It's reasonable to expect us to continue the momentum of cost reduction and focusing our investments.

It's reasonable to expect us to continue the momentum of cost reduction and.

Focusing our investments very very clearly on on those.

Speaker Change: clearly on those parts of the market and those parts of the product development activity that carry the greatest value, accretion.

<unk> of the market in those parts of the product development activity that carry the greatest value accretion.

Speaker Change: So I hope that gives you a sense of what our priorities are at this point in time.

So I hope that that gives you a sense of what we're what our priorities are at this point in time.

Speaker Change: um... that's very helpful to look just uh... clarify on that uh... you break out of operating expenses into three different categories and there was a notable decline fourth q verses third quarter i don't want to work your mouth but it sounds like you're not done yet we could see

That's very helpful. So just to clarify on that.

You break out operating expenses into three different categories and there was a notable decline fourth Q versus third quarter I don't want to put words in your mouth, but it sounds like youre not done yet we could see further sequential decline into the first quarter.

Speaker Change: further sequential recline into the first quarter. The other one, though, that I'm wondering about is you're doing development work on a brand-new vehicle, the Aero Z, and so I would think you'd be hard-pressed to keep a handle and reduce R&D expenses, especially as we go through the year. Could you give us some color on that, please?

Other one though that the that I'm wondering about is youre doing development work on a brand new vehicle.

<unk> Z and so I would think you'd be hard pressed to keep a handle on reduce R&D expenses, especially as we go through the year. If you could give us some color on that please.

Yeah happy to give you a color on that Barry.

So you don't have to put words in my mouth, we're not done yet.

Speaker Change: So you don't have to put words in my mouth. We're not done yet.

Speaker Change: And, and as for the AeroZ development, you know, we have put

And as for the <unk> development.

We have put a team in place that has tremendous experience in vehicle development and product development and technology development.

Speaker Change: that has tremendous experience in vehicle development, in product development, in technology development. And that team has an entirely different approach.

And that team has an entirely different approach to rapid model year refresh development, which is far more cost effective it's far more efficacious and it's going to produce a product that is vastly vastly advanced.

Speaker Change: to rapid model year refresh development, which is far more cost effective. It's far more efficacious.

Speaker Change: And it's going to produce a product that is vastly, vastly advanced over the legacy platform. So we're not going to spend.

For the legacy platform.

So we're not going to spend.

More money, we're going to spend less money in a more focused way.

Speaker Change: more money we're going to spend less money in a more focused way and it's in our view we're aiming to to have a platform that will set the standard in the low-speed electric vehicle market.

In our view, we're aiming to have a platform that will set the standard in the low speed electric vehicle market.

Speaker Change: So, no, you should not expect development expenses to go up exactly the opposite.

So no you should not expect development expenses to go up exactly the opposite.

And last question on the Arrow XE do you have any thoughts on the selling price and the gross margin you'd wanted to achieve.

Speaker Change: And last question, on the Aero Z, do you have any thoughts on the selling price and the gross margin you'd want to achieve? Is the current vehicle price right? Is it too high? And obviously you want to be able to make these things significantly more profitably than what you're doing today through China.

The current vehicle price stride as it too high and obviously you want to be able to make these things significantly more profitably than what youre doing today through China.

Well so that's a very complex question varies I'm sure you know.

Speaker Change: Well, so that's a very complex question, Barry, as I'm sure you know, and I'm not going to comment on selling price or margin.

And I'm not going to comment on selling price or margin.

Speaker Change: At this point in time, we are working to develop a world-class bill of materials.

At this point in time, we are working to develop a world class Bill of materials.

Speaker Change: all sourced from the North American continent or selectively sourced from North America and overseas.

All sourced from the North North American continent, or selectively sourced from North America.

And overseas.

Fundamentally.

Speaker Change: Fundamentally, our intent is to do a model-year refresh every year, which is very common and customary in the vehicle space.

Our intent our intent is to do a model year refresh every year, which is very common in the and customary in the vehicle space.

Speaker Change: So we're gonna conduct ourselves like a vehicle company. We expect.

So we're going to conduct ourselves like a vehicle company.

We expect.

Speaker Change: Obviously, we're not working this hard to not make margin on the new platform.

Obviously, we're not working this hard to not make margin on the new platform.

Speaker Change: I mean, that goes without saying. But fundamentally, I can't comment on that, Barry, because we haven't even frozen the bomb yet. So until we get to that point in time.

It goes without saying, but but fundamentally I can't comment on that Barry because we haven't even frozen the bomb yet so until we get to that point in time.

Speaker Change: You know, we obviously have targets, but targets are targets, and it would be awfully arrogant to think that.

We obviously have targets with targets or our targets.

And it.

It would be awfully arrogant to think that.

Speaker Change: that every target as we have said it would be one we would achieve we're certainly going to do very very well in our view but uh... i'm gonna reserve the right answer that question on a future call i'll hold you to that thank you very much for taking my questions

That every target as we have said it would be when we would achieve we're certainly going to do very very well in our view, but I'm going to reserve the right to answer that question on a future call.

I'll hold you to that thank you very much for taking my questions.

Our pleasure Barry have a great day.

Speaker Change: Again, if you have a question, please press star then 1.

Again, if you have a question. Please press Star then one.

This concludes our question and answer session I would like to turn the conference back over to you Tom wouldn't slugger for any closing remarks.

Speaker Change: This concludes our question-and-answer session. I would like to turn the conference back over to Tom Wittenschlager for any closing remarks.

Well I'd like to I'd like to conclude by thanking all of you for participating on today's call and for your interest in Arrow.

Tom Wittenschlager: Well, I'd like to conclude by thanking all of you for participating on today's call and for your interest in Arrow.

Tom Wittenschlager: We look forward to sharing our progress on our next quarterly conference call when we report our first quarter results in May. We thank each of you.

We look forward to sharing our progress on our next quarterly conference call. When we report our first quarter results in May.

We thank each of you have a great day.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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