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spk01: Ladies and gentlemen, thank you for standing by. Good morning and welcome to the ARO, Inc. Second Quarter 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in the listen-only mode. Should you need assistance, please signal 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 1 on your telephone keypad. To withdraw your question, please press star then 2. 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 November 15th, 2023. I would now like to turn the call over to Joey Della Husi of Core IR, the company's investor relations firm. Please go ahead, sir.
spk02: Thank you, Anthony. Good morning, and thank you for participating in today's conference call. Joining me from ARO's leadership team are Tom Wittenschlager, Chief Executive Officer, and Dave Hollingsworth, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address ARO's 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 ARO's most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC in ARO'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 ARO 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. For 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 ARO's earnings press release, which is available on its website at www.aro.com under the Investors tab. Content of this call contains time-sensitive information that is accurate only as of today, August 15th, 2023. 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 CEO Tom Wittenschlager.
spk04: Hey, thank you, Joey, and good morning to everyone on the call. We've continued to make progress in the second quarter and beyond towards our goal of commercializing our new LSEV, the AeroVanish. While our entire and singular focus today is the successful launch of the Vanish and its many payload options, we've made all preparations to efficiently advance our Valet and Vapor models as line extensions of the Vanish into their next phases of development following the successful launch of the Vanish. We've strengthened our balance sheet, ramped up inventory build, and are awaiting the receipt of final certifications of our homologation, safety, and testing requirements, which we anticipate will be completed shortly. These certifications will enable Arrow to commence sales with confidence in our product's performance, safety, and quality in earnest. And we're thrilled to have passed all of the requisites to obtain these. In addition to homologation, we've been very busy drive testing and track tuning the drive performance, suspension settings, regenerative motor braking, and even climate control performance in closed and open environments of advantage so that it will represent what we believe are the highest engineering standards in the LSEB space. We're in the final stages of calibrating our braking and motor control tuning, after completing our ride dynamics optimization of the suspension, tires, steering, and handling features. In addition to the two prominent design awards The Vantage has received from Red Dot and from Frost & Sullivan, we want to ensure that the manufacturing of the vehicle and the customer experience match the award-winning design elements. With a combination of numerous payload options available for The Vantage, along with all of the quality control measures I've just described, we believe that Vantage will find strong customer acceptance in the market for a host of end-market uses, whether it be campus or arena setting, or even in a last-mile or a last-mile extension application. With homologation largely behind us, our attention is now focused on completing the transition to low-rate initial production, or LRIP. We're working to make Arrow synonymous with quality, innovation, safety, and performance. And we believe our production ramp is now more streamlined, as we addressed a number of supply chain and sourcing constraints in the quarter. Our focus has now turned to building out inventory, and I'm delighted to report that we're close to finishing the build of our 12th VANISH first article unit. Numerous models have been used in our homologation testing, while others have gone to our marketing efforts for demonstration to distributors, strategic partners, upfitters, and potential customers. We expect we will continue into full-fledged LRIP in the coming quarter with the intention of beginning the ramp to production quantities of the Vantage. We plan to build approximately 60 Vantage units during LRIP with the intention of selling and placing these early units with vehicle upfitters, distributors, strategic partners, and key end customers that we believe will offer the greatest sales leverage entering 2024. Of course, there'll be a learning curve for our manufacturing team during LRIP as we scale the manufacturing floor and gain further assembly and product flow experience. Following LRIP and the Vantage launch, we will target moving to full-scale production, which we currently expect to commence in early 2024. For context, We currently anticipate producing nine vehicles per day with our first full shift underway, which would translate to over 2,000 vehicles per year of capacity under the guidelines mentioned above. Assuming a ramp in demand, we're in a position to add a second shift here in our Round Rock factory, as well as utilizing an established automotive OEM partner to manage surge demand. We believe our infrastructure and preparation for fulfilling demand is developed, sound, and on target. Once we move to full production, we anticipate cost savings per vehicle resulting from the use of production tooling, volume leverage, and learning curve improvements, all of which are customary in vehicle production programs. We believe that these advances in 2024 will allow us to improve our gross margins. As we continue to make progress on our goals to produce our award-winning Vantage, We're also keenly focused on sales and marketing and have made strides in building a growing network of dealers, potential fleet customers, and a growing cadre of potential large multi-vehicle customers in the stadium, resort, campus, corporate, and hospitality fields, among others. Our relationship with Masters Golf and Utility Vehicles of Ontario Canada is ongoing. And we're excited to move forward into full production and commence sales and marketing activities that we envision will bear strong results. We've signed a growing number of dealers under our dealer program, and we look forward to expanding this impressive list. We've further formed relationships with vehicle upfitters that will see the Vanish as an enabler to improve functionality in their respective spaces. We're making steady progress on our efforts in establishing our direct-to-consumer, or DTC, sales channel. We're finalizing our e-commerce site and our first on-site location in Florida that will enable our DTC efforts, allowing customers to order, configure, and customize the Vantage directly from Arrow's e-commerce website. Establishing our presence in Florida will serve two goals for Arrow. Florida happens to be one of several states where direct-to-consumer vehicle sales are permitted. It is also an expansive potential market for the Vantage and our follow-on products, the PeopleMover, we call the valet, and what we believe is the world's most stylized golf cart, the Vapor. We believe we're on track with establishing our DTC capability and expect to launch within a week. On the intellectual property front, we're strengthening our IP portfolio consisting of both design patents as well as utility patents. We continue to believe the combination of our anticipated future sales and sales growth together with our growing IP portfolio has the potential to create sustainable shareholder value and provide numerous differentiators in this segment that otherwise hasn't evolved with prevailing technologies nor market opportunities in several decades. Moving on to our financials, sales in the second quarter were in line with our expectations of the sunsetting of our legacy Club Car Current vehicle, and slightly higher than sales in the first quarter. As I've mentioned before, our principal focus has been on the development of the Vantage, and our inventory of remaining Club Car Current vehicles is now quite minimal. We've begun increasing inventory during the second quarter to prepare for LRIP and beyond. As an EV company building a disruptive product in markets with very strong demand, we aim to sell large distributors, strategic partners, and customers with large appetites, so our need to ramp inventory, according to our forecast, is significant. We believe our efforts to create a plurality of vehicles on our new platform are exciting and significant and will offer flexibility and leverage for additional vehicles beyond the Vantage. To this end, we recently raised $22 million in cash from existing stockholders. This additional capital allows us to continue building our business and execute our strategic plan without a market pause for capital and offers additional runway and strategic options to ramp inventory, to grow the platform count, along our path to profitability. Quite simply, we're now better positioned financially. That concludes my opening remarks. Now I'd like to turn the call over to Dave Honsworth, who will review our financial results in more detail. Dave?
spk03: Thanks, Tom, and good morning, everyone. Here's a summary of our second quarter 2023 financial results. Revenue for the quarter ended June 30th, 2023, was $139,544. A decrease of 86% year-over-year, the sales recorded in the second quarter of 2023 represents the runoff of the Club Car current inventory as we transition to the Arrow Vanish. Total operating expenses for the second quarter of 2023 were approximately $6.1 million as compared to approximately $4.1 million in the second quarter of 2022. The year-over-year increase in total operating expenses was due primarily to the completion of the Vanish product and a ramp to LRIP and full production. Adjusted EBITDA, a non-GAAP measure for the second quarter of 2023, was a loss of approximately $5.5 million versus a loss of approximately $3.6 million in the second quarter of 2022. Net loss for the quarter ending June 30th, 2020 was approximately $6 million versus a net loss of approximately $6 million in the year-ago quarter. Cash and marketable securities at June 30, 2023, was approximately $33 million versus $48.9 million at the end of 2023. Total debt was zero at June 30, 2023, as it was on December 31, 2022. As of June 30, 2023, the company had 37,536,101 common shares outstanding. That concludes my prepared remarks. I'd like to turn the call back over to Tom for the remaining comments.
spk04: Thank you, Dave. We look forward to continuing to execute on our business model and to accomplishing our goals to become a leading force in the very exciting LSEB space. And with that, I'd like to turn the call over to the operator so we can begin the question and answer session. Operator?
spk01: Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press the star, then the number one on your telephone. If your question has been answered and you wish to withdraw your question, you may do so by pressing star then two. If you're using a speakerphone, please pick up your handset before entering your request and speaking on the call. One moment please for the first question. And if you have a question, please press star then one. It appears we have no questions. I would like to turn the conference back over to Tom Wittenschlager for any closing remarks.
spk04: Thank you, Anthony. I'd like to thank all of you for participating on 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 third quarter 2023 results, likely in November of 2023. Thank you and have a good day.
spk01: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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