Workhorse Group Inc. (Nasdaq: WKHS) (“Workhorse”
or “the Company”) an American technology company focused on
providing sustainable and cost-effective drone-integrated electric
vehicles to the last-mile delivery sector, today reported financial
results for the second quarter ended June 30, 2022.
Management Commentary
“Our critical strategic initiatives remain on time and on
budget,” said Workhorse CEO Rick Dauch. “The recent actions we’ve
taken include building out our leadership team; transforming our
manufacturing operations; establishing strategic relationships with
industry-leading suppliers; and executing on our product roadmaps
for both Commercial and Aerospace vehicles. We secured a new
purchase agreement for our C1000, W4 CC and W750 products, which
includes over 1,000 build slot reservations in 2022 and 2023. We
remain confident in the solid foundation we are putting in place to
deliver electric vehicles that our customers want and need.”
Second Quarter 2022 and Recent Operational
Highlights:
Workhorse delivered on its stated priorities from the first
quarter by enhancing its team and strengthening its financial and
operational position in the following key areas:
- Hired experienced sales, functional, engineering, and
operational talent across the business to complement previous
executive appointments.
- Hired a new VP Sales & Marketing for Commercial Vehicles,
who will join the Company in early September.
- Onboarded five Principal Engineers with a combined 175-plus
years of experience, including a Chief Engineer for the Company’s
Aerospace business.
- Strengthened the supply chain team, by adding four automotive
industry veterans in purchasing, transportation & logistics and
supplier development roles.
- Continued to make progress in transforming Workhorse’s Union
City plant into a world-class manufacturing complex. With factory
renovations complete, warehouse repairs and upgrades ongoing, and
test track construction and site security improvements well
underway and expected to be completed by year’s end, the Company is
on track to start production in the main production facility in Q3
2022.
- Signed a three-year contract manufacturing agreement to
assemble vehicles for Tropos Technologies in Union City beginning
in Q4 2022. The contract is a result of the people, plant, and
process improvements made to date. Volumes for final assembly in
the U.S. market are expected to reach about 2,000 units per year
once ramp-up is complete.
- Completed the relocation of the Company’s Aerospace business
into a new 75,000 ft2 facility in Mason, Ohio, which includes
sufficient space for future manufacturing activity.
Executing Revised Strategic Product Roadmap
Workhorse remains on track to execute its revised strategic
product roadmap. The Company continued to make steady progress
across all four of its electric vehicle platforms during the
quarter:
- C1000: Revised C1000 front suspension design
is complete; due care FMVSS testing is expected to be completed and
production to begin in Q3 2022. Workhorse remains on track to
return vehicles to service and repair all previously manufactured
vehicles produced to date by year’s end. The Company also plans to
manufacture 50 to 75 additional C1000’s by year’s end from
inventory on hand.
- W750/W4 CC: The Company’s Class 4 delivery
vehicles are generating significant interest from customers in
demonstrations across the country. Workhorse received the first
shipment of Green Power chassis in July and will be in production
on the W4 CC in Q3 2022 and the W750 step van in Q4 2022.
- W56: Workhorse continues to execute on its
plan for the W56 platform with the start of regular production
still planned for Q3 2023. This approach provides the Company with
the shortest path to full BEV platform production, leverages
existing Workhorse designs and will have various wheelbase options
with a common parts bin. The Company continues to make key supplier
decisions and has chosen suppliers for the eAxle and batteries. As
a result, about 75% of the materials for the vehicle are sourced
and committed. Design confirmation build was completed in the new
Wixom, Michigan technology center in July. Final design and testing
protocols for the W56 will be completed by Q2 2023.
- W34: The Company is combining its Class 3 and
Class 4 segment experience generated by the E-Gen and the C1000
programs with new technology to develop the W34 platform. Features
of the W34 will include the Accessible Low Floor Platform with
improved ride and handling, efficient lightweight systems, and
advanced technology. With production beginning in late 2024, the
W34 will be coming to market just as the industry’s tailwinds
arrive.
CEO Rick Dauch added: “By the end of 2024 we will have a full
family of safe, reliable, and affordable CL3-6 EVs, built in the
heartland of our country, to meet the demanding and diverse needs
of the commercial work truck and delivery van markets here in North
America.”
Progress in Aerospace Technology
Workhorse continues to invest in its drone operations and secure
key commercial partnerships and funding, including the following
actions taken in the quarter:
- Began UAV design confirmation builds as part of efforts to
address the fast-growing markets for both last mile package
delivery as well as the geographical mapping & sensor-based
market segments. Initial production of commercial drones will begin
in Q3 2022.
- Secured additional contracts with the U.S. Department of
Agriculture to provide monitoring, data procurement and analytics
as part of demonstration projects.
- Currently operating in Ohio, North Dakota, and Mississippi to
support multiple Federal and State funded government programs.
Second Quarter 2022 Financial Results
Sales, net of returns and allowances, for the second quarter of
2022 were recorded at $12.6 thousand compared to $1.2 million in
the same period last year. The decrease in net sales was primarily
due to a decrease in vehicle sales.
Cost of sales decreased to $3.0 million from $14.8 million in
the same period last year. The decrease in cost of sales was
primarily due to a $6.7 million decrease in inventory write-downs
and a $2.0 million decrease in cost due to a reduction in vehicle
sales. Additionally, the decrease in cost of sales was due to a
reduction in costs associated with the initial production of the
C-Series vehicle platform.
Selling, general and administrative (“SG&A”) expenses
increased to $13.0 million from $7.0 million in the same period
last year. The increase was primarily driven by an increase of $4.8
million in employee compensation and labor related expenses due to
increased headcount and non-cash equity compensation.
Research and development (“R&D”) expenses increased to $5.0
million from $2.1 million in the same period last year. The
increase was primarily driven by an increase of $1.3 million in
employee compensation and labor related expenses due to increased
headcount. Additionally, there was a $1.1 million increase in
consulting and prototype expenses related to the continued
development of the Company’s HorseFly™, W56, and W4 CC/W750 vehicle
programs.
Net interest expense was $0.1 million compared to $10.5 million
in the same period last year. The decrease in net interest expense
is primarily due to an $8.5 million increase in fair value of the
convertible notes due 2024 during the three months ended June 30,
2021, as compared to no changes in fair value during the three
months ended June 30, 2022.
Other loss was zero compared to $11.7 million in the same period
last year, attributable to unfavorable changes in fair value of the
Company’s prior investment in Lordstown Motors Corp, which was sold
entirely in Q3 2021.
Net loss was $21.2 million compared to net loss of $43.6 million
in the same period last year. Loss from operations for the second
quarter was $22.1 million compared to $22.7 million in the same
period last year.
As of June 30, 2022, the Company had approximately $140.1
million in cash and cash equivalents.
2022 Guidance
Assuming current supply chain lead times remain unchanged,
Workhorse now expects to manufacture and sell between 150-250
vehicles and generate between $15-25 million in revenue for
calendar year 2022.
“‘Our results demonstrate the steady progress our team is making
as we execute on our product roadmap, invest prudently in our
operations and preserve our financial position, which will allow us
to deliver enhanced value to our customers and shareholders,” said
Workhorse CFO Bob Ginnan.
Conference Call
Workhorse management will hold a conference call today (August
9, 2022) at 10:00 a.m. Eastern time (7:00 a.m. Pacific time) to
discuss these results and answer related questions.
U.S. dial-in: 877-407-8289International dial-in:
201-689-8341
Please call the conference telephone number 10 minutes prior to
the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Gateway Investor Relations at
949-574-3860.
The conference call will be broadcast live and available for
replay here and via the Investor Relations section
of Workhorse's website.
A telephonic replay of the conference call will be available
after 1:00 p.m. Eastern time on the same day through August 16,
2022.
Toll-free replay number: 877-660-6853International replay
number: 201-612-7415Replay ID: 13731941
Note on Orders and Slot Reservations
As used in this release, the term “orders” refers to products
that a customer has made a contractual commitment to purchase.
Customer orders are typically subject to conditions such as timing
of delivery, compliance with specifications, satisfaction of
quality standards and, in some cases, availability of financing to
the customer. Additionally, customers may not purchase products
even if all purchase conditions have been satisfied. Accordingly,
there is no assurance that any order for a product will result in
the sale of that product.
As used in this release, the term “slot reservation” means the
Company’s commitment to a customer that Workhorse will make a
portion of its production capacity available to produce products
for them at a specified time. Slot reservations do not include a
binding customer commitment to purchase a product, however they do
require a deposit. Accordingly, while the Company believes slot
reservations provide a useful indicator of future customer interest
in its product, there is no assurance that a slot reservation will
result in an order for any product or the sale of any product.
About Workhorse Group Inc.
Workhorse is a technology company focused on providing
drone-integrated electric vehicles to the last-mile delivery
sector. As an American original equipment manufacturer, we design
and build high performance, battery-electric vehicles including
trucks and aircraft. Workhorse also develops cloud-based, real-time
telematics performance monitoring systems that are fully integrated
with our vehicles and enable fleet operators to optimize energy and
route efficiency. All Workhorse vehicles are designed to make the
movement of people and goods more efficient and less harmful to the
environment. For additional information visit
workhorse.com.
Forward-Looking Statements
This press release contains forward-looking statements
reflecting our current expectations that involve risks and
uncertainties. These statements are made under the “safe harbor”
provisions of the U.S. Private Securities Litigation Reform Act of
1995. When used in this document, the words “anticipate,” “expect,”
“plan,” “believe,” “seek,” “estimate” and similar expressions are
intended to identify forward-looking statements. These are
statements that relate to future periods and include, but are not
limited to, statements about the features, benefits and performance
of our products, our ability to introduce new product offerings and
increase revenue from existing products, expected expenses
including those related to selling and marketing, product
development and general and administrative, our beliefs regarding
the health and growth of the market for our products, anticipated
increase in our customer base, expansion of our products
functionalities, expected revenue levels and sources of revenue,
expected impact, if any, of legal proceedings, the adequacy of
liquidity and capital resources, and expected growth in business.
Forward-looking statements are statements that are not historical
facts. Such forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ
materially from the forward-looking statements contained in this
press release. Factors that could cause actual results to differ
materially include, but are not limited to: our ability to develop
and manufacture our new product portfolio, including the recently
announced W750, W56 and W34 platforms; our ability to attract and
retain customers for our existing and new products; risks
associated with obtaining orders and executing upon such orders;
supply chain disruptions, including constraints on steel,
semiconductors and other material inputs and resulting cost
increases impacting our company, our customers, our suppliers or
the industry; our ability to implement modifications to vehicles to
achieve compliance with Federal Motor Vehicle Safety Standards and
to meet customer demands with respect to the C-1000s; the results
of our ongoing review of the Company’s business and go-forward
operating and commercial plans; our ability to capitalize on
opportunities to deliver products to meet customer requirements;
our limited operations and need to expand and enhance elements of
our production process to fulfill product orders; the ability to
protect our intellectual property; negative impacts stemming from
the continuing COVID-19 pandemic; market acceptance for our
products; our ability to control our expenses; potential
competition, including without limitation shifts in technology;
global and local business conditions; acts of war (including
without limitation the conflict in Ukraine) and/or terrorism; the
prices being charged by our competitors; our inability to retain
key members of our management team; our inability to raise
additional capital to fund our operations and business plan; our
inability to maintain our listing of our securities on the Nasdaq
Capital Market; our inability to satisfy our customer warranty
claims; the outcome of any regulatory or legal proceedings; our
liquidity and other risks and uncertainties and other factors
discussed from time to time in our filings with the Securities and
Exchange Commission (“SEC”), including our annual report on Form
10-K filed with the SEC. Forward-looking statements speak only as
of the date hereof. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in our expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based,
except as required by law.
Media Contact:Aaron Palash / Greg KlassenJoele
Frank, Wilkinson Brimmer Katcher212-355-4449
Investor Relations Contact:Matt Glover and Tom
ColtonGateway Investor Relations949-574-3860WKHS@gatewayir.com
Workhorse Group
Inc.Condensed Consolidated Statements of
Operations(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Sales, net of returns and allowances |
$ |
12,555 |
|
|
$ |
1,202,876 |
|
|
$ |
26,854 |
|
|
$ |
1,723,936 |
|
Cost of sales |
|
3,020,204 |
|
|
|
14,796,130 |
|
|
|
6,943,555 |
|
|
|
21,021,429 |
|
Gross loss |
|
(3,007,649 |
) |
|
|
(13,593,254 |
) |
|
|
(6,916,701 |
) |
|
|
(19,297,493 |
) |
Operating expenses |
|
|
|
|
|
|
|
Selling, general and administrative |
|
13,030,143 |
|
|
|
7,005,537 |
|
|
|
24,940,402 |
|
|
|
13,891,367 |
|
Research and development |
|
5,027,061 |
|
|
|
2,123,860 |
|
|
|
9,038,995 |
|
|
|
5,987,575 |
|
Total operating expenses |
|
18,057,204 |
|
|
|
9,129,397 |
|
|
|
33,979,397 |
|
|
|
19,878,942 |
|
Loss from operations |
|
(21,064,853 |
) |
|
|
(22,722,651 |
) |
|
|
(40,896,098 |
) |
|
|
(39,176,435 |
) |
Interest expense (income), net |
|
95,419 |
|
|
|
10,478,717 |
|
|
|
2,318,709 |
|
|
|
(4,441,756 |
) |
Other loss |
|
- |
|
|
|
11,699,666 |
|
|
|
- |
|
|
|
148,305,618 |
|
Loss before benefit for income taxes |
|
(21,160,272 |
) |
|
|
(44,901,034 |
) |
|
|
(43,214,807 |
) |
|
|
(183,040,297 |
) |
Benefit for income taxes |
|
- |
|
|
|
(1,281,947 |
) |
|
|
- |
|
|
|
(18,914,439 |
) |
Net loss |
$ |
(21,160,272 |
) |
|
$ |
(43,619,087 |
) |
|
$ |
(43,214,807 |
) |
|
$ |
(164,125,858 |
) |
Workhorse Group
Inc.Condensed Consolidated Balance
Sheets
|
June 30, 2022 |
|
December 31, 2021 |
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
140,060,575 |
|
$ |
201,647,394 |
Accounts receivable, less allowance for credit losses of zero as of
June 30, 2022 and December 31, 2021 |
|
784,668 |
|
|
149,776 |
Inventory, net |
|
12,557,319 |
|
|
10,067,367 |
Prepaid expenses and other current assets |
|
11,749,364 |
|
|
4,357,829 |
Total current assets |
|
165,151,926 |
|
|
216,222,366 |
Property, plant and equipment, net |
|
13,582,936 |
|
|
7,897,807 |
Lease right-of-use assets |
|
11,666,276 |
|
|
1,538,852 |
Other assets |
|
126,310 |
|
|
2,479,865 |
Total Assets |
$ |
190,527,448 |
|
$ |
228,138,890 |
Liabilities |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,787,194 |
|
$ |
7,849,607 |
Accrued and other current liabilities |
|
9,596,353 |
|
|
14,752,827 |
Warranty liability |
|
3,322,212 |
|
|
4,583,916 |
Current portion of lease liabilities |
|
1,050,585 |
|
|
363,714 |
Total current liabilities |
|
17,756,344 |
|
|
27,550,064 |
Lease liabilities, long-term |
|
8,942,651 |
|
|
1,191,053 |
Convertible notes, at fair value |
|
- |
|
|
24,705,000 |
Total Liabilities |
|
26,698,995 |
|
|
53,446,117 |
Stockholders' equity |
|
163,828,453 |
|
|
174,692,773 |
Total Liabilities and Stockholders' Equity |
$ |
190,527,448 |
|
$ |
228,138,890 |
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