Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Workhorse Group Inc (WKHS, Financial) made significant progress on their EV product roadmap during Q2 2024.
- The company entered a strategic collaboration with KTS in Kingsburg, California, to supply 141 W4CC cab chassis units in 2024 and 2025.
- Workhorse Group Inc (WKHS) received a major milestone with the award of a Sourcewell contract, expanding their commercial reach to government, education, and non-profit sectors in all 50 states and Canada.
- The company continues to expand its commercial presence, adding three new dealer partnerships in early EV adoption regions of the country.
- Workhorse Group Inc (WKHS) has taken critical actions to reduce expenses, including divesting the aerospace business and reducing headcount, to extend their financial runway.
Negative Points
- The first half of 2024 saw slower than anticipated industry-wide electric vehicle adoption rates, affecting Workhorse Group Inc (WKHS)'s financial results.
- Delays in the CARB HVIP voucher approval process limited the revenue recognized by the company in the second quarter.
- The company continues to operate at a reduced headcount, with a net reduction of approximately 50% of their staff.
- Workhorse Group Inc (WKHS) reported a net loss of $26.3 million for the second quarter, compared to $23 million in the same period last year.
- The company had only $5.3 million in cash as of June 30, 2024, down from $35.8 million at the end of 2023, indicating a significant decrease in liquidity.
Q & A Highlights
Q: Can you provide a breakdown of the $46.5 million in inventory at the end of the June quarter? How much of that is finished goods and how many trucks does this represent?
A: Approximately $20 million to $24 million is finished trucks, about $12 million is batteries, and the rest relates to parts primarily associated with the W56. Of the $20 million to $24 million in trucks, around $10 million is associated with one particular purchase order.
Q: With the current $4 million monthly burn rate, do you have the capacity to respond to the 10,000-unit RFP from the US Postal Service?
A: We have the capital and people in place to produce our current orders. For larger purchase orders, the burn rate would change due to the working capital required to buy materials. We are focused on our R&D roadmap, and any diversion would require incremental cash spend.
Q: What is the pipeline of customers going into 2025? How much do you have in the final phases of being signed to get on the road in early next year?
A: We have two orders in-house for about 30 trucks, with additional pending orders that could ship late this year or early next year. We are working through budgeting processes with large fleets, and we hope to secure more orders by October 1.
Q: You mentioned putting a new project on hold to preserve cash. How much of a departure was this vehicle from your current offerings?
A: The vehicle is a complementary Class 5-6 product based on customer feedback, more for utility-type trucks and service trucks. It pushes out 12 to 18 months but doesn't hurt near-term financials and will help long-term.
Q: Can you elaborate on the strategic collaboration with KTS in Kingsburg, California?
A: We committed to supply 141 W4CC cab chassis units in 2024 and 2025. KTS is seeing demand from small private and government-funded fleets. We received payment for the first 30 trucks, but delays in CARB HVIP voucher approval limited revenue recognition in Q2.
Q: What actions have you taken to reduce expenses and extend your financial runway?
A: We divested the aerospace business, reduced headcount, furloughed workers, and delayed a future product program by 12 to 18 months. These actions reduced our cash burn rate from $11 million to $4 million per month.
Q: How are you addressing the slower-than-anticipated industry-wide electric vehicle adoption rates?
A: We are optimistic about demand going into 2025, driven by federal and state emission requirements and HVIP certification of our W56. We are developing reliable products and have a world-class manufacturing plant to build them.
Q: What are your near-term priorities?
A: Our key strategic priorities are securing new orders, delivering world-class products and services, and advancing our product portfolio roadmap. We aim to effectively finance the company until we achieve breakeven free cash flow.
Q: Can you provide an update on your financial results for Q2 2024?
A: Sales were $800,000 compared to $4 million last year, primarily due to lower W4 CC vehicle sales. Cost of sales decreased to $7.3 million, and SG&A expenses decreased to $12.1 million. Net loss was $26.3 million compared to $23 million last year.
Q: What steps are you taking to strengthen your balance sheet and liquidity position?
A: We have reduced headcount, deferred executive cash compensation, delayed the W56 cab chassis launch, and completed the Aero business divestiture. We have $112.7 million of remaining facility available to us.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
