Q4 2022 AYRO Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by welcome to the Arrow incorporated year end 2022 financial results and corporate update conference call.
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Yeah.
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At this time I'd like to turn the floor over to you.
Joey fellow who see of core IR, the company's Investor Relations firm Sir. Please go ahead.
Thank you Jamie good morning, and thank you for participating in today's conference call. Joining me from Arrow's leadership team are Tom Wiggans Lager, Chief Executive Officer, and David Hollingsworth, Chief Financial Officer.
During this call management will be making forward looking statements, including statements that address a real its expectations for future performance or operational results.
Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
For more information about these risks please refer to the risk factors described in Arrow's. Most recently filed annual report on Form 10-K, and subsequent periodic reports filed with the SEC in Arrow's press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call includes adjusted EBITDA, a non-GAAP financial measure that arrow believes can be useful in evaluating its performance you should not consider this additional information in isolation or substitute for results prepared in accordance with GAAP.
A reconciliation of this non-GAAP financial measure to net loss its most directly comparable GAAP financial measure. Please see the reconciliation table located in Arrow's earnings press release, which is available on its website at www Dot zero dot com under the Investor tab.
Content of this call contains time sensitive information that is accurate only as of today March 23 2023.
Kept as required by law, they erode 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 CEO , Tom which lager.
Okay. Thank you Joanne and good morning to everyone on the call.
The fourth quarter of 2022 capped off a year of what we feel is significant progress at arrow.
We generated sales from our legacy product the club car correct and made additional progress in the design and sourcing of the Arrow vanish.
Along with the build out and tooling of her manufacturing facility right here in round rock, Texas.
As I have discussed before the vantage is our first low speed electric vehicles to be designed and developed based on the new common core chassis strategic roadmap.
Vantage is a utility L. L C b or low speed electric vehicle with a lightweight architecture and adaptable bed configurations to support both light duty and heavy duty applications.
It was designed to leave minimal impact on the environment has zero emissions, making it well suited for both indoor and outdoor uses such as in stadiums arenas campuses, which works at.
Last mile delivery environment as long as all the other situations, where toxic fumes or a safety concern.
We'll be street legal and will be governed to a max speed of 25 miles per hour.
The vantage.
Grid discrete components and the very large majority of these are being sourced from North America.
The MSRP of advantaged chassis is anticipated to be about $34000, while we intend to sell it's interchangeable payloads for roughly a $1000 to $5000 each.
In terms of our performance through the end of 2022 revenue in the fourth quarter came from continued sales of the legacy club car current units and we've now sold off nearly all of the inventory of this product.
While we anticipate that some sales of the current will trickle into the first and second quarters of 2023 piece will likely be minimal.
However, we expected and planned for this dip in revenue as we aim to complete the transition from the legacy current to the next generation vanish.
In the first half of 2023.
While revenue May decline. These next two quarters until the advantages in production, we believe our quarterly cash burn will be in the same range as it has been over the last three or four quarters.
Our team has done a great job of managing total operating expenses as evidenced by nearly $11 million decline in total opex in 2022 over 2021.
Cash and marketable securities at the end of 2022 were approximately $49 million, implying a cash runway that exceeds two years.
Current spending levels.
The reduction in operating expenses and cash burn is not an insignificant feet mind you given that this has occurred even as we were running at breakneck speed to design a new platform.
Design, the first vehicle on that platform and begin the manufacturing build out of our round rock, Texas facility.
Another major change going into 2023 is that we no longer rely on central or any other suppliers from China to source any vehicle components.
We no longer rely on Karma automotive in California for vehicle Assembly, nor on club car for exclusive distribution. Instead, we have an entirely new supply chain than that largely eliminates shipments from Asia and we are developing in house manufacturing capabilities. So we believe will allow us to control our own destiny.
So I have to speak.
As well as enjoy higher margins per vehicle at scale.
As I've always maintained the long term success of Aero It should be based on the success of the entire common core chassis family of vehicles of which the vantage is expected to be the first of three to be launched.
This success will be driven by the hard work experience ingenuity and creativity of our entire team.
Customer acceptance and market penetration of our vehicles is paramount.
We believe this will ultimately be reflected in our anticipated future sales and profits not and how we've performed in the rear view mirror or under a different strategic direction. Crucially. This is why there is considerable optimism and anticipation within our own ranks despite the tenuous economic backdrop.
Stock market malaise.
Currently the vantages preparing is preparing to enter the Homologation face, which is some certification approval process at all vehicles wants to go through that involves crashing crushing enrolling a vehicle to ensure it's safe and that it complies with L. S. E V governance speed requirements prior to it being a law.
Out into the marketplace.
Furthermore, Homologation will also ensure that the vantage meets the California carb requirements for zero emission transportation.
Homologation is generally a 12 week process and we believe that we will successfully exited homologation sometime in June .
Margaret Prime obligation is underway, we will be simultaneously focused on efficiently ramping our supply chain, which is a pivotal step in being able to maximize the production and sell through of the vanish and placing additional banish units with dealers for demo purposes.
Following homologation of we expect to enter L rep or low rate initial production by the end of June thus any initial sales of the vantage will likely be rather small until the second half of 2023.
However, do not take that to mean, we haven't yet begun ourselves in marketing outreach for the vantage on the contrary, we've already announced our first authorized dealer we're in various stages of negotiation with more than 50 additional dealers in the U S and Canada and have what appears to be a substantial expression of interest.
For the very first units off our assembly line.
Thus, we believe our pipeline of potential dealers as strong as its dealer interest in the vantage product, which we believe offers numerous design ergonomic and technological enhancements along with a total cost of ownership advantages over the status quo products currently found in the marketplace.
Bringing a new vehicle to market takes time, but I firmly believe that the last 15 months of effort by the Euro team was necessary to lay a proper foundation for what we believe will be our sustainable growth race, the real beauty of our strategic roadmap is it subsequent vehicle watches we use essentially.
The same critical components as they vanished, meaning there should be very little design effort and retooling needed for future potential vehicles, which would substantially shorten the time to market for those vehicles that can address a completely different segment of the EV marketplace.
Also important in our corporate strategy is the development of a strong IP portfolio.
Intellectual property can act as barriers to entry are competitors and contribute greatly to stockholder value.
Hopefully you've seen some of our recent press releases highlighting our IP progress we continued to gain momentum in IP and some patents have already been issued multiple matters are currently an examination and we filed certain patent continuations and we'll be filing even more patent and trademark applications in the future.
Strength of our corporate about creating a sustainable solution in the EV space motivates us.
And our solutions are neither trivial nor obvious we believe the world will increasingly trend towards successful sustainability and having an IP around our assets should only make us a more valuable company.
That concludes my opening remarks.
Now I'd like to turn the call over to Dave Hollingsworth, who will review our financial results in more detail Dave.
Thanks, Tom and good morning, everyone. Here's a summary of our fiscal year 2022 financial results revenue for the year ended December 31, 2022 was 2.990 million $497, an increase of 11, 4% year over year. The sales recorded in the fourth quarter of 2022.
Represent the run off of our of our club car current inventory as we transition to the Aero vanish.
Annual sales increased due to growth in sales of the outgoing aero products.
Total operating expense for the year 2022 were approximately $20 2 million as compared to $31 million in 2021, the year over year decrease in total operating expenses was due primarily to research reduced research and development expense, resulting from the discontinuation of the previous 311.
<unk> product development and reduced general and administrative expenses due to reduced general spending implemented during the corporate strategic review by the management team.
Adjusted EBITDA, a non-GAAP measure for 2022, it was a loss of approximately $18 5 million versus a loss of approximately $25 million in 2021.
Net loss in 2022 was approximately $22 9 million, which was an improvement from a net loss of approximately $33 1 million in 2021. The decrease was a result of the cost cutting measures implemented by the management team, but was impacted by a 2.35 million in adjustments name.
The N C M failure and certain write offs.
Cash and marketable securities at December 31, 2022 was approximately 49 million versus $69 1 million at the end of 2021.
Total debt was zero at December 31, 2022, as it was at December 31 2021.
As of December 31, 2022, the company had 37 million 352203 common shares outstanding.
That concludes my prepared remarks, I'd like to turn the call to Covid, Tom Bernie remaining comments.
Thank you Dave.
In summary, 2022 was a year of progress at Arrow on many fronts.
Revenue grew 11% year over year.
We now have very few remaining units left of our legacy vehicles. The club car current for sale.
However, and I would contend more importantly, total operating expenses were down nearly $11 million in 2022 versus 2021.
Which we feel is a testament to our team's ability to prudently manage expenses, even while building a platform that we believe will provide sustainable growth.
Lastly, and most importantly, we made significant progress in the design of the common core chassis platform and our first internally developed vehicle the light duty utility vehicle Bureau vanish.
We believe we are very close to entering production and achieving sales of this new generation of vehicles.
It is my belief that this next phase of our corporate trajectory will be a much better barometer for our future than anything else in our corporate history. Furthermore, once the vantage has successfully launched we intend to turn our efforts to finishing the design of our next two vehicles a people mover called the Arrow valet.
And a personal transport vehicle or P. T V.
Which should have similar functionality to a traditional golf cart that we call the aero vapor.
However, we believe the vapor will be unlike any other golf cart on the market today.
We'll have much more to say about those initiatives at a later time.
As always.
I'd like to thank all of our stockholders for their continued support and I look forward to sharing additional corporate updates over time.
And with that I'd like to turn the call over to the operator. So we can begin the question and answer session.
Operator.
Ladies and gentlemen at this time, we'll begin the question and answer session if.
If you wish to ask a question on today's call you simply need to press the Star key and then the number one on your telephone.
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Once again that is star and then one quick question.
Our first question today comes from Brian Land here from Zacks. Please go ahead with your question.
Hey, good morning, gentlemen.
I think it's really encouraging that youre still on pace to meet the initial deliveries of the vanish in Q3.
One question I guess I have is about the future models will they be will they be subject to the same homologation process for valley in vapor.
Brian Good morning.
The answer to your question is yes, homologation is a platform specific activity.
We expect the.
Obligation process, which generally spans 12 weeks sure.
To remain relatively constant along all platforms. Obviously you know as we proceed through Homologation on a common core platform architecture, we expect very few surprises.
So the timeframe remains the same but we anticipate you know.
Literally flying through Homologation without without many issues on a go forward basis.
Great that's good to hear.
I guess secondly are there any particular industries or use cases.
That are coming up when you're talking to potential dealers or customers that are in line with your initial expectations or maybe even surprising you where some of the initial interest has been shown for the vanish.
Well.
That's a very good question, Brian and today the segments that we expected our.
Showing brisk interest so if I had to categorize them.
I would start with our segment that we would call fleet refresh so the reef refresh of commodity fleets with jet, which generally are refreshed whether you're in the resort business and the golf business and the Marina business in the.
Any of those businesses. They generally refresh every three or four years and in those refresh cycles are necessary because the quality of their commodity products is as such that that's their effective lifetime.
We're seeing a lot of interest there, especially because the the lifetime of our product is anticipated to be more than double that so so the economics of the refresh cycle changed dramatically.
We're seeing fairly a fairly substantial interest from the expected places from resorts from golf from.
From a debt those segments.
So in the bigger picture.
You know, they're there arent any startling surprises.
There is always a surprise from a distribution and aware b initial expressions of interest are but that's just part of launching a brand new product.
Right, Okay and.
On the 10-K that you're attempting to your position on the GSA schedule.
Do you think that is possibility in 2023.
Well, it certainly is and Don.
The way, we're beginning that positioning is through partners that already have GSA presence that would add our offering to their existing GSA schedule position.
So it's not the case, Brian that we're gonna ourselves try to get on the schedule, but rather we're going to focus on being in addition to this schedule with select partners and already have that presence.
Great. Thank you for clearing that up I.
I guess one quick question for Dave is in the 10-K. It says the central inventories about 244000, so if I back out that number from the inventory the bulk of the inventory is principally new vanish related inventory.
It is that's correct. We have we have like Tom said, a few holdovers are the legacy product that will roll into this this first half of this next year, but none of them. The vast majority of our product as our buildup for inventory to to complete the L. Rip for the vanish.
Great Fantastic. Thank you so much guys.
Youre welcome, Brian and have a great week.
Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May press Star and two.
We will pause momentarily to assemble the roster.
Yes.
Okay.
Yeah.
Yes.
Yeah.
And our next question comes from Mike Quinlan from <unk>. Please go ahead with your question.
Hey, gentlemen, thanks for the call today real positive stuff just one real quick question I noticed in your 10-K.
You know, we're coming up on April 3rd, which I believe is the.
180 day extension for the NASDAQ minimum bid rule and so I guess my question is have you all applied for an extension as an extension to be granted and being that were you know less than 10 trading days away from April 3rd I'm getting to a dollar would obviously not be realistic is there any strategy to date.
Sure that or kind of what is your strategy in terms of the outstanding shares there.
There's two questions there, Mike and I'll take the first one.
We've been in constant contact with the NASDAQ and fulfilling all of their rules.
That are going to be applied to us as we still remain below a $1 a share.
So they are up to date with us and we know that that that will continue to.
Per their rules into the year.
The second question more of how we want to combat that.
<unk> will be for us the delivery of the sales of the Arrow vanish, we believe that investors want to see this product.
<unk> by the marketplace and by delivering those units in finding those dealers.
See that stock price.
Reflect that hard work over the last 15 months.
Okay. So you don't get an anticipated these listing on a third or would you granted.
80 day extension beyond that.
Yeah exactly yes, we were up again like I said, we're at understood is that.
Okay. Thank you.
Youre welcome Mike.
And ladies and gentlemen, with that we've reached the end of today's question and answer session I'd like to turn the floor back over to management for any closing remarks.
Now I'd like to I'd like to thank all of you for participating on today's call and for your interest in Arrow we.
We look forward to sharing our progress on the next quarterly conference call. When we report our first quarter 2023 results likely in May 2023.
Thanks to all have a great day.
And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.