Workhorse Group Inc. (Nasdaq: WKHS)
(“Workhorse” or “the Company”), an American technology
company focused on pioneering the transition to zero-emission
commercial vehicles, today reported financial results for the first
quarter ended March 31, 2024.
Management Commentary
“During the first quarter, we took important strategic and
financial actions to better position Workhorse for the future while
continuing to hit major milestones,” said Workhorse CEO Rick Dauch.
“Our successful W56 demonstrations with dealers and fleet operators
continue to affirm the strong market potential of our commercial EV
trucks. This April, we celebrated a major milestone with a
substantial order for our W4 CC trucks and expanded our dealer
network to include new locations in New York and a set of
dealership locations across the upper Midwest region.”
Mr. Dauch continued, “While we are pleased with our recent
progress, we proactively took steps this quarter to preserve cash
and extend our financial runway. We recently closed a financing
transaction that provides liquidity in both the short term and over
time, enabling us to continue our transition from a technology
start-up into a successful commercial EV OEM. We have taken
aggressive cost reduction actions across the organization,
including a 20% reduction in force and throttling capacity at Union
City by temporarily furloughing the team there, matching our
resources and production demands until our financial and operating
position permits.”
Mr. Dauch concluded, “The transition to EV technology in the
commercial truck and last-mile segment is taking place, although
like any change, it will not happen overnight. While we’ve
experienced delays, we believe the transition is underway, and we
will continue taking decisive steps to succeed in the market and
drive value for our stockholders. We have proven our product in the
market, and we have the pieces in place to continue advancing our
roadmap and capture the significant opportunities ahead.”
Executing Successful Strategic and Financial
Actions
- Advancing
Commercial EV Product Roadmap: The Company continued
executing successful product demonstrations and has been in
constructive discussions regarding purchase orders with potential
customers that have large last-mile fleets. To date, Workhorse has
received orders for 68 W56 step vans. Additionally, in April
Workhorse received a purchase order for 141 W4 CC cab chassis from
Kingsburg Truck Sales (“KTS”) for delivery over the coming
quarters, which effectively represents all of the Class 4 finished
goods inventory at Union City. Each of these orders are subject to
significant terms and conditions including, in the case of trucks
to be delivered in California, the receipt of HVIP vouchers for
such trucks, and the purchasers have, under certain circumstances,
the right to cancel such orders without any penalty or other
cost.
- Expanding Commercial Dealer and Service
Footprint: Workhorse continued expanding its dealer
network, most recently adding key dealers and partners in multiple
states. Within the past month, the Company announced new dealer
agreements with Milea Truck Sales and Leasing and the Ziegler Truck
Group. Workhorse now has 12 dealer partners, strategically targeted
in states adopting the California Air Resources Board (“CARB”)
“Clean Fleet” standards.
- Entered into Financing Agreement: On March 15,
2024, the Company entered into a securities purchase agreement with
an institutional investor for senior secured convertible notes for
up to an aggregate principal amount of $139.0 million and warrants
to purchase shares of common stock to support the Company’s
continued execution of its product roadmap and commercial EV
business plans. To date, the Company has received gross proceeds
from this financing agreement of approximately $15 million before
original issue discount, fees, and expenses.
- Conserving Cash: Workhorse has taken steps to
aggressively reduce costs across the organization to ensure it can
continue to complete the transition from technology start-up to a
full-fledged commercial EV OEM while continuing to deliver world
class products, services, and value for its customers and
stakeholders. The Company has completed a reduction in force of
approximately 20% of the total workforce, excluding direct labor.
The workforce at the Union City plant was temporarily furloughed on
April 22.
- Divesting Aero Business: The Company is
working with a third party to complete the divestiture of the Aero
business in the second quarter. While the Company does not expect
to realize cash proceeds upon the consummation of the sale, the
Company expects the divestiture to provide monthly cost savings of
approximately $375,000, and the Company expects that the final
divestiture agreement will include limited earn out provisions
under which the Company would receive a portion of the proceeds if
the Aero business realizes revenues from certain contingent
sources. In the meantime, the Aero business is operating as usual.
Workhorse continued scanning agricultural land in Mississippi under
existing USDA and NCRS grant awards during the first quarter and is
in advanced discussions with multiple government agencies to
provide expanded aerial scanning and services in the future.
First Quarter Financial Results
Sales, net of returns and allowances, for the first quarter of
2024 were $1.3 million compared to $1.7 million in the same period
last year. The decrease in sales was primarily due to lower W4 CC
vehicle sales compared with the same period a year ago, which was
partially offset by an increase in other service revenue generated
from operating the Company’s Stables by Workhorse route, Drones as
a Service, and other service revenue.
Cost of sales increased to $7.4 million from $5.3 million in the
same period last year, primarily driven by a $2.2 million increase
in inventory reserve expenses, a $1.0 million increase in
depreciation expenses, and a $0.6 million increase in employee
compensation and related expenses to support vehicle production
during the period. The increase in cost of sales was partially
offset by a $1.2 million decrease in costs related to direct
materials and a $1.4 million reversal of warranty expenses
previously accrued.
Selling, general, and administrative (“SG&A”) expenses
decreased to $14.1 million from $14.7 million in the same period
last year. The decrease in SG&A expenses was primarily driven
by a $1.7 million decrease in employee compensation and related
expenses primarily due to a decreased headcount, which was
partially offset by a $0.3 million increase in non-cash stock-based
compensation expense and an increase of $0.6 million in
professional and other services expenses during the
period.
Research and development (“R&D”) expenses decreased to $3.5
million compared to $7.2 million in the same period last year. The
decrease in R&D expenses was primarily due to a $2.1 million
decrease in prototype expenses related to development expenses for
new products, which launched in 2023, a $0.7 million decrease in
consulting expenses, and a $0.8 million decrease in employee
compensation and related expenses due to decreased headcount.
Net interest expense was $5.4 million compared to net interest
income of $0.6 million in the same period last year. Net
interest expense in the current year was driven by a fair value
adjustment of the Company’s 2024 Notes and 2024 Warrants,
respectively, of $7.0 million and $1.2 million fees paid in
connection with the 2024 Notes and 2024 Warrants issued during the
period. The expense was partially offset by a gain of $2.9 million
from the extinguishment of the Company’s 2026 Notes, conversion of
the 2023 Warrants, and $0.1 million of interest earned on cash
balances in the Company’s money market investment accounts. Net
interest income in the prior year period was primarily driven by
interest earned on cash balances in the Company’s money market
investment account.
Net loss was $29.2 million compared to $25.0 million in the same
period last year.
As of March 31, 2024, the Company had $6.7 million in cash and
cash equivalents, accounts receivable of $1.8 million, net
inventory of $49.9 million, and accounts payable of
$14.2 million.
First Quarter Overview
“We are continuing to take steps to extend our operational
runway and manage our cash efficiently. These actions include a
successful financing and the work we are doing on a potential
sale-leaseback transaction for our Union City facility that would
further solidify our financial foundation,” said Workhorse CFO Bob
Ginnan. “Looking ahead, we remain optimistic about our ability to
drive additional purchase orders this year, which would enable us
to grow revenues and strengthen our financial position.”
Conference Call
Workhorse management will hold a conference call on Friday, May
24, 2024, 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 Group 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 May 31,
2024.
Toll-free replay number: 877-660-6853International replay
number: 201-612-7415Replay ID: 13746831
About Workhorse Group Inc.
Workhorse is a technology company focused on providing ground
and air based electric vehicles to the last-mile delivery sector.
As an American original equipment manufacturer, we design and build
high performance, battery-electric trucks and drones. 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
The discussions in this press release contain 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 press release, 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 our liquidity and capital resources, the likelihood of
us obtaining additional financing in the immediate future and the
expected terms of such financing, 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 W4 CC,
W750, W56 and WNext platforms; our ability to attract and retain
customers for our existing and new products; risks associated with
obtaining orders and executing upon such orders; the
unavailability, reduction, elimination or adverse application of
government subsidies and incentives or any failure by the federal
government, states or other government entities to adopt or enforce
regulations such as the California Air Resource Board’s Advanced
Clean Fleet regulation; 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 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; our general
inability to raise additional capital to fund our operations and
business plan; our ability to obtain financing to meet our
immediate liquidity needs and the potential costs, dilution and
restrictions imposed by any such financing; our ability to regain
compliance with the listing requirements of the Nasdaq Capital
Market and otherwise maintain the listing of our securities thereon
and the impact of any steps we take to regain such compliance, such
as a reverse split of our common stock, on our operations, stock
price and future access to liquidity; our ability to protect our
intellectual property; market acceptance for our products; our
ability to obtain sufficient liquidity from operations and
financing activities to continue as a going concern and, our
ability to control our expenses; the effectiveness of our cost
control measures and impact such measures could have on our
operations, including the effects of furloughing employees;
potential competition, including without limitation shifts in
technology; volatility in and deterioration of national and
international capital markets and economic conditions; global and
local business conditions; acts of war (including without
limitation the conflicts in Ukraine and Israel) and/or terrorism;
the prices being charged by our competitors; our inability to
retain key members of our management team; our inability to satisfy
our customer warranty claims; the outcome of any regulatory or
legal proceedings, including with Coulomb Solutions Inc.; our
ability to consummate the divestiture of our aero business; our
ability to consummate and realize the benefits of a potential sale
and leaseback transaction of our Union City Facility; and other
risks and uncertainties and other factors discussed from time to
time in our filings with the Securities and Exchange Commission
(“SEC”), including under the “Risk Factors” sections of our filings
with the SEC, including our Annual Report on Form 10-K for the year
ended December 31, 2023. 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 Group949-574-3860WKHS@gateway-grp.com
Workhorse Group Inc.Condensed Consolidated Balance
Sheets(Unaudited) |
|
|
March 31, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
6,728,430 |
|
|
$ |
25,845,915 |
|
Restricted cash |
|
— |
|
|
|
10,000,000 |
|
Accounts receivable, less allowance for credit losses of
$0.2 million and $0.2 million as of March 31, 2024
and December 31, 2023, respectively |
|
1,767,887 |
|
|
|
4,470,209 |
|
Inventory, net |
|
49,852,378 |
|
|
|
45,408,192 |
|
Prepaid expenses and other current assets |
|
7,293,787 |
|
|
|
8,101,162 |
|
Total current assets |
|
65,642,482 |
|
|
|
93,825,478 |
|
Property, plant and equipment,
net |
|
38,537,214 |
|
|
|
37,876,955 |
|
Lease right-of-use assets |
|
9,513,950 |
|
|
|
9,795,981 |
|
Other assets |
|
176,310 |
|
|
|
176,310 |
|
Total Assets |
$ |
113,869,956 |
|
|
$ |
141,674,724 |
|
Liabilities |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
14,229,542 |
|
|
$ |
12,456,272 |
|
Accrued and other current liabilities |
|
6,652,042 |
|
|
|
4,862,740 |
|
Deferred revenue, current |
|
4,689,581 |
|
|
|
4,714,331 |
|
Warranty liability |
|
599,227 |
|
|
|
1,902,647 |
|
Current portion of lease liabilities |
|
3,416,636 |
|
|
|
3,560,612 |
|
Warrant liability |
|
3,937,540 |
|
|
|
5,605,325 |
|
Current portion of convertible
notes |
|
7,874,051 |
|
|
|
20,180,100 |
|
Total current liabilities |
|
41,398,619 |
|
|
|
53,282,027 |
|
Lease liabilities,
long-term |
|
5,047,565 |
|
|
|
5,280,526 |
|
Total Liabilities |
|
46,446,184 |
|
|
|
58,562,553 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
Equity: |
|
|
|
Series A preferred stock, par value $0.001 per share, 75,000,000
shares authorized,zero shares issued and outstanding as of
March 31, 2024 and December 31, 2023 |
|
— |
|
|
|
— |
|
Common stock, par value $0.001 per share, 450,000,000 shares
authorized, 330,791,980shares issued and outstanding as of
March 31, 2024 and 285,980,843 shares issued and outstanding
as of December 31, 2023 |
|
330,792 |
|
|
|
285,981 |
|
Additional paid-in capital |
|
847,817,018 |
|
|
|
834,394,441 |
|
Accumulated deficit |
|
(780,724,038 |
) |
|
|
(751,568,251 |
) |
Total stockholders’ equity |
|
67,423,772 |
|
|
|
83,112,171 |
|
Total Liabilities and Stockholders’ Equity |
$ |
113,869,956 |
|
|
$ |
141,674,724 |
|
Workhorse Group Inc.Condensed Consolidated
Statements of Operations(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Sales, net of returns and
allowances |
$ |
1,339,295 |
|
|
$ |
1,693,415 |
|
Cost of sales |
|
7,442,778 |
|
|
|
5,328,119 |
|
Gross loss |
|
(6,103,483 |
) |
|
|
(3,634,704 |
) |
Operating expenses |
|
|
|
Selling, general and administrative |
|
14,095,278 |
|
|
|
14,689,843 |
|
Research and development |
|
3,527,911 |
|
|
|
7,224,849 |
|
Total operating expenses |
|
17,623,189 |
|
|
|
21,914,692 |
|
Loss from operations |
|
(23,726,672 |
) |
|
|
(25,549,396 |
) |
Interest income (expense),
net |
|
(5,429,115 |
) |
|
|
550,359 |
|
Loss before benefit for income
taxes |
|
(29,155,787 |
) |
|
|
(24,999,037 |
) |
Benefit for income taxes |
|
— |
|
|
|
— |
|
Net loss |
$ |
(29,155,787 |
) |
|
$ |
(24,999,037 |
) |
|
|
|
|
Net loss per share of common
stock |
|
|
|
Basic and Diluted |
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
Weighted average shares used
in computing net loss per share of common stock |
|
|
|
Basic and Diluted |
|
302,607,192 |
|
|
|
167,144,351 |
|
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