Release Date: May 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Workhorse Group Inc (WKHS, Financial) received substantial orders for both W56 and W4 CC trucks, indicating strong market potential.
- The company is expanding its commercial network by adding new dealers, including critical locations in New York City and the upper Midwest and Northwest regions.
- Workhorse Group Inc (WKHS) has transitioned its Aero business to a less capital-intensive Drones as a Service model, providing additional financial flexibility.
- The company has taken steps to strengthen its financial position, including securing $15 million in gross proceeds from a financing agreement and implementing cost reductions.
- Workhorse Group Inc (WKHS) has demonstrated significant improvement in operating cost savings using its EV trucks, which has been shared with large fleets, enhancing market credibility.
Negative Points
- Sales for Q1 2024 decreased to $1.4 million from $1.7 million in the same period last year, primarily due to lower W4 CC vehicle sales.
- Cost of sales increased to $7.4 million from $5.3 million in the same period last year, driven by higher inventory reserve expenses, depreciation, and employee compensation.
- The company experienced a net loss of $29.2 million compared to $25 million in the same period last year.
- Workhorse Group Inc (WKHS) had to temporarily furlough employees at its Union City plant due to a lack of truck orders, impacting workforce morale and community employment.
- The transition to EV technology in the commercial truck and last mile segment is progressing slower than expected, affecting the company's growth trajectory.
Q & A Highlights
Q: At this point, you've got DHL and other FedEx fleets running EV vans for a couple of years now. Why not monetize the fleet at this point and move forward since it's clear that EVs are working for other folks?
A: We wanted to get at least six months of data on the W56s. The Stables program has been important for R&D and marketing. It has provided documented proof of cost savings, which has garnered attention from last-mile fleets. Long-term, we may monetize the Stables operation.
Q: Are any of the recent orders contingent on having a subsidy attached to them?
A: Almost every W4 CC order is tied to California HVIP incentives. Some W56 orders are not tied to incentives and are going to larger fleets, while others are tied to HVIP credits required in California.
Q: Can you share any progress on non-parcel delivery vehicle orders and customer plans for the current orders?
A: All 141 W4 CCs going to Kingsburg are for non-last mile delivery, including state trucks, dump trucks, and utility-type trucks. These are mostly for small agricultural programs and local distributors in California.
Q: What is the burn rate post the changes in April and May?
A: The burn rate was about $5.5 million in Q1, but we expect it to be sub $5 million in Q2. With full savings from the reductions, the expense will likely be closer to $4 million, but we need to build back up inventory, so it will be in the $4.5 million to under $5 million range.
Q: What is your daily or weekly production capacity, and will you need to rehire staff as business resumes growth?
A: Currently, we are building about one chassis a day and can ramp up to four or five a day by year-end. We will need to bring back about 15 to 20 more employees in the near future. Our workforce is committed and understands the challenges of the EV transition.
Q: What impact do you see from the battery tariffs, and how will it affect Workhorse?
A: Short-term impact is minor as we have 214 sets of CATL batteries on site. Long-term, we are assessing the impact and exploring alternative suppliers. We are confident in CATL's plans and will stick with them as long as they execute well.
Q: Do you believe there is a credible path to sufficient buy American content on the battery packs?
A: We have had discussions with CATL and their distributor about their future plans. We are confident they have a plan to localize in North America. We will also look at other potential suppliers as new plants come online.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
