Ayro Inc. Q1 2023 Earnings Call
With the screens any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
It's now my pleasure to turn the call over to CEO , Tom Wiggans closet.
Thank you Joey and good morning to everyone on the call.
We believe we've made important strides in the first quarter of 2023 that bring us ever closer to launching the arrow vanish are lightweight low speed electric vehicle or LLS EV with adaptable and Reconfigurable payloads that will serve the stadium arena campus resort and last mile delivery environment.
Both indoors and out.
In the last few earnings calls, we have gone to considerable lengths to lay out the business case for our product roadmap and to provide some context to our corporate strategy from the outset, we recognized that while an 18 month design and manufacturing scale up process is actually remarkably short in the automotive world Dominion inverse.
<unk> it may as well be four years.
Our team is enthusiastic about what we've already accomplished and even more so at the significant opportunities that we believe lie just ahead of us.
We've made real progress on the dealer front, and we've had encouraging discussions with potential fleet dealers.
We believe our participation in a recent large tradeshow, where many potential customers, we're able to see the vantage firsthand for the first time, it's been very productive for us and we hope to be in a position to share some developments arising from those marketing efforts.
We believe we can establish new fleet relationships that could provide meaningful sales opportunities the.
The benefit of fleet partnerships is the high unit order volumes, they can potentially provide us from a recurring fleet refresh cycle within their respective customer bases a.
Our strong fleet partner can potentially equal dozens of standalone dealers without regard to territory exclusivity.
That said, we're certainly focusing on signing up dealers under our dealership program.
Earlier in 2023, we announced our first dealer indication of interest with Masters cough and utility vehicles.
Ontario, Canada since that announcement, we have signed many more dealers under our dealer program and while we won't provide specific dealer counts I will provide some context for this topic.
Under our former relationship with club car for the club car current vehicle club car had the potential to generate sales of the current from all of its approximately 450 dealerships.
However, the reality was that only 42 dealerships out of this 450 ever generated a sale of the current throughout our multi year relationship.
For comparison, the number of locations operated by dealers with whom we are in discussions already exceeds 42, and we are in various stages of negotiation with many more potential future dealers.
I hope that is helpful in terms of outlook on the dealer and fleet channels.
On the direct to consumer or DTC channel, we're working to finish our E Commerce site and an onsite location in Florida to support our DC DTC efforts for customers to be able to customize and order the advantaged directly from arrow in those states that allow DTC vehicle sales.
Florida happens to be one of those states and we believe it is a large potential market for the advantage and our follow on products that people mover, we call the valet and what we believe is the world's most attractive golf cart called the vapor we expect our DTC capability to be ready to launch in the third quarter of 2020.
Three.
Now I would like to talk about the status of the vantage vehicle and just where we are in the process of bringing it to market.
The vantage will enter the Homologation face. This week as we are just recently successfully completed a series of internal tests at a test track in Houston, Texas.
Allegation process is a series of safety assessment tests on the vehicle can take up to 12 weeks, depending on the queue of other vehicles also waiting on Homologation.
However, while homologation is occurring with advantage and in parallel with that certification process. We plan to enter low rate initial production or L. Rep by early June to begin building. The first 50 vantage units.
These units are largely earmarked for dealer, Florida is demo vehicles B L. Rip phase is used to ensure the supply chain is flowing smoothly and allows our manufacturing team to scale that learning curve of assembling the components and sub systems.
Following L Rep, which we anticipate may take a month, we would expect to begin full scale production, where we are targeting nine vehicles per day five days per week under a single shift scenario.
This would equate to over 2000 vehicles per year of capacity under the guidelines mentioned above.
Until Homologation is complete we anticipate holding back any finished inventory advantaged units, we believe any delays or deferrals in customer shipments of the vantage should homologation take longer than we would prefer a rather trivial in the big picture and will be unlikely to lead to order cancellations.
As is always the case in first model year production, we expect and plan for supply chain uncertainties until our component suppliers are flowing.
In their product smoothly.
Once in full production, we do have the ability and likely the intent given some early signs of demand to move to a second shift that can help us produce more output advantage units from our own manufacturing floor based on our current forecast, we anticipate moving to that production cadence as fast as possible post L. Rip.
Even more significant than adding a second shift is our potential ability to source additional production of the entire vantage vehicle from an OEM automotive component supplier that currently serves the big three automakers.
That supplier also happens to be our Cassie component supplier for the vantage.
Fortunately they have production capacity at their facility to be able to handle the assemble the assembly of the entire vantage vehicle should we choose to route any excess surge demand to them down the road wildly.
While this decision would likely come with initial startup issues and alerting period from all parties that we would just need to accept it does offer the potential for us to ramp our total production of units in a much faster fashion.
Greenfield construction of a new manufacturing facility at least at this point in time.
So we anticipate addressing any excess demand initially with a second shift and then likely by resorting to our relationship with this OEM component supplier for any true surge in demand that would otherwise overwhelm our manufacturing facility.
Needless to say this would be very nice problems to encounter and address this early in the commercial launch of the vantage.
These so called problems and I use that term tongue in cheek that we're now facing are simply the result of what we feel are the perceived quality and value proposition of the vantage and advancements in a category that we feel has been quite stagnant stagnant.
For much too long.
But you don't have to take my word for it and certainly the market is appreciating this aspect either apparently thus.
Thus far in 2023, we've won two prominent awards for design from two separate market research companies.
The first was in January of 2023, when FERC Frost and Sullivan of <unk>.
Ordered us to 2023, North American New product Innovation award in the low speed vehicle industry for the Vantages design.
And as if that were not enough in April we were named as a 2023 Red Dot award recipient for product design further advantaged based on its principles of good design and its sociocultural character technical focus area and design expertise.
Many engineers and designers can go their entire career without winning either a frost <unk> Sullivan or a red Dot Award.
We want it on our first design after pivoting the company 18 months ago that is a remarkable achievement and I'm very proud of all our employees here at Arrow, one would expect that these validation so to design and value add merits of advantage to translate into appreciable unit sales and that is <unk>.
Definitely what we are viewing this opportunity that is finally right in front of us.
On the intellectual property or IP front, we continue to grow our portfolio both in the rate of patent and trademark filings as well as in the rate of grants by the U S. PTO. We believe the combination of our anticipated future sales and sales growth together with our growing IP portfolio should add sustainable shared.
Holder stockholder value and provide numerous opportunities in this segment that otherwise hasn't evolved with prevailing technologies, nor with market opportunities.
In our 2022 year end earnings discussion I provided explicit guidance that revenue for legacy club car Kurt vehicle would be minimal in the first half of 2023, given the run off of current inventory in the sunset phase of that vehicle that was certainly the case in the first quarter given our revenue.
Approximately $100000 quite simply that phase of Arrow is in the past and I've maintained all along that I believe future sustainable stockholder value will come from the future adoption of our new <unk> products not from revenue of our legacy products.
Hopefully my comments. This morning are painted a picture for arrow that is as bright as ever.
We continue to manage costs as effectively as possible all while ramping our internal activities for the benefit of advantaged and subsequently the valet and the vapor.
Our net loss in the quarter, even with considerably lower sales of the current was roughly the same as it has been over the last year, we believe our cash and equivalents balance of nearly $42 million will be sufficient for us to reach breakeven. According to our current forecast.
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 David.
Thanks, Tom and good morning, everyone. Here's a summary of our first quarter 2023 financial results revenue.
Revenue for the first quarter ended March 31, 2023 was $113084 a decrease of 89% year over year. The sales record in the first quarter of 2023 represents a run off of our club car current inventory as we transitioned to the Aero vantage.
Total operating expenses for the first quarter of 2023 were approximately $5 7 million as compared to approximately $4 4 million in the first quarter of 2022 the year over year increase in total operating expenses was due primarily to the completion of the vantage product and a ramp to <unk> and <unk>.
Production.
Adjusted EBITDA, a non-GAAP measure for the first quarter of 2023 was a loss of approximately $5 1 million versus a loss of approximately $4 2 million in the first quarter of 2022.
Net loss for the quarter ending March 31, 2023 was approximately $5 5 million versus a net loss of approximately $4 6 million in the year ago quarter.
This decrease was again, a result of the completion of the vantage product and ramp to <unk> and full production.
Cash and marketable securities at March 31, 2023 was approximately $41 7 million versus $48 9 million at the end of 2022.
Total debt was zero in March 31, 2023, as it was at December 31 2022.
As of March 31, 2023, the company had 37 million 352204 common shares outstanding <unk>.
That concludes my prepared remarks, and I'd like to turn the call back over to Tom for any reason and any comments Tom.
Thank you Dave.
As you can probably tell from my earlier comments I am optimistic and enthusiastic.
About our competitive positioning.
As we get close to the commercial launch of the advantage. We believe we have the right design elements and solutions for the <unk> market as the Frost <unk> Sullivan and Red Dot awards can attest to.
We believe we have the right team given all that we've accomplished with the new common core chassis platform. The initial vantage design and the impending valet and vapor designs in such a relatively short period of time.
We believe we have the right distribution strategies, given what we believe is a consistent interest from dealers and fleet customers looking to offer our products to their customers.
And we have a growing IP portfolio that can help us build moats around our technologies and products and methods of creating sustainably engineered vehicles.
To date the market doesn't appear to have caught onto our better mouse trap, perhaps through a variety of reasons.
However, as we continue to innovate and execute and share important corporate developments. We believe this will all change and.
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.
On today's call.
Sorry.
Thank you.
If your question has been answered and you wish to withdraw your question.
You may do so by pressing star Kim.
If you are using a speakerphone. Please pick up your handset before entering where we question speaking on the call. One moment. Please for the first question.
Okay.
The first question comes from Brian Lee and tier Zach. Please go ahead.
Good morning, Tom Dave.
Good morning, Brian just provided good morning.
Just give me a little.
Feedback that you may have received from some of the potential dealers or fleet managers.
From the trade shows that you've attended.
Principally what what sort of attributes and the vanish are standing out to them is that the quality of the build although like features.
Or maybe the configured reality of the platform.
Well, Brian that's a great question.
As you know when you when you go to a trade show.
Everybody looks at things in their own unique way so.
There is no uniformity.
Of perspective, when people are looking at product what we what we saw that was fascinating kind of went into the following fundamental categories.
The first thing is as people actually put their hands on them vanish and compared it to apparently similar products at the at the show.
It was a lights on Epiphany in terms of the difference between a product build to automotive OE standard standards versus a product build let's just call. It two commodity golf cart standards.
The difference of every detail the difference of the quality the difference of the finish.
Difference of the styling and the look.
They all were night and day differences or as we would say jetson propellers.
Compared to what currently exists in the golf Cart World.
And in a lot of people commented first of all on.
The quality of the materials, we use which are unusual and unique in this space.
A lot of people commented on how roomy.
The interior was.
How significant enhanced payload capacity wise.
And so.
From from the point of view that we have a dual display head that can be used for a variety of purposes to the fact that our cargo subsystem is completely reconfigurable every morning by resort and golf operators to the fact that this is just a fundamental.
The higher quality vehicle with the bonus points that this thing is designed in the United States sourced in the United States built in the United States and supported in the United States as compared to the commodity products coming across the Pacific.
All those things seem to add up to make a pretty powerful impression on both dealers and fleet managers.
Okay.
Great. Thank you that's all.
That's really good feedback.
Just like to reiterate all incredibly encouraged by.
The news on some of the early.
Outlook for the rest of the year.
Certainly.
Better outlook than I have built into my models currently.
Regarding the motor order.
Scioto.
Are those motors going strictly into the vanish or will that be for the entire product line.
Yeah.
Well, Brian that's a good question and the entire design philosophy of our product line is it every component in every vehicle is identical.
They're not similar they are identical.
So a motor and advantage is the same as a motor and a valet is the same as a motor and a vapor.
And the reason we did that the motors are the same the wheels and tires are the same the seats are the same the displays are the same that controllers are the same the batteries are the same that whole philosophy means that that a customer.
Who puts our logistics plan or supply chain for spares and provisions in place for any of our vehicles has its supply chain for all our vehicles.
So the order. The initial order you saw placed is an order that will provide.
Axial flux motors for every single product in the product line this year.
And every single product anticipated on a go forward basis.
I think that's an important point too that investors will eventually pick up on as well.
Maybe just a quick question for Dave.
The growth in inventory.
So stated with all of the new products.
There's no longer any.
Club car related inventory, principally and and then lastly for Dave.
If I sort of look out through the forecast over the next 12 weeks to get pass the ball.
The homologation process.
We could possibly be taking the first orders and bookings sales in Q3 or should I look at that maybe going into Q4.
Item.
Thanks, Brian I appreciate you.
First off of the inventory purchases no inventory is vastly consumed by the Arrow vantage now we will of course be beginning a few small parts to support our legacy product.
That central product, but it'll be minimal completely.
Completely immaterial to our books.
<unk> now or to set up for <unk> and then of course to set up for full production as we move forward and to increase those prepaid and actual inventory buys as we prepare for that.
As for your second question, we've been talking through this presentation about.
Getting our vehicles built as we complete homologation and of course that will dictate when we recognize sales in certain areas.
So that will be something we'll be following very closely we have everything aligned with those homologation teams. So they can move as quickly as they are able to move so that we will hold them up at all because our priority is to deliver vehicles out as quickly as they can especially the demo vehicles to our fleet.
Channel partners.
Of course recognize the corresponding sales along with those units being moved.
Great. Thank you so much.
Thanks, Brian .
And Dan if you have a question. Please press Star then one.
The next question is from Matthew Paul in Shack, a private investor. Please go ahead.
Yeah.
Good morning, Tom and everyone.
For clarification I think you mentioned that your remaining cash has been about $41 million.
But if I'm looking at the earnings.
<unk> looks like.
Cash at the end of the period is 31, nine plus acute assets around $137 million.
Can you explain what I'm missing here.
Yes, so the turn when we talked about what that $42 million is cash and marketable securities. So we still hold if you look at the next line a significant amount of mainly T bills.
Our product portfolio to just get the best <unk>.
<unk> of our cash that we're not actively using so we do hold some in marketable securities that we include in that $42 million, because we have easy access to that cash.
I'm looking at yes.
Yes.
I just don't see it and then.
You said the next one.
It depends on what charter looking at so we have if you look at my balance sheet that we have market cash and marketable securities.
So those are the two pieces that we include together.
Because theyre very liquid.
Okay. Thank you.
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 Tom Leighton Sugar for closing remarks.
I want to thank all of you for participating in today's call and for your interest in Arrow, we look forward to sharing our progress on our next quarterly conference call. When we report our second quarter 2023 result, likely in the August of 2023.
Thanks again.
Have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.