8-K: Workhorse Group Reports Second Quarter 2024 Results, Focuses on EV Product Expansion and Cost Management

Workhorse Group reported second quarter 2024 financial results, highlighting progress in EV product development, new dealer partnerships, and cost-saving measures, while acknowledging the need for further financial improvements.

Summary

• Workhorse Group announced its financial results for the second quarter of 2024, with sales of $0.8 million, a decrease from $4.0 million in the same period last year.
• The company experienced a net loss of $26.3 million, compared to a $23.0 million loss in the second quarter of 2023.
• Cost of sales decreased to $7.3 million, primarily due to lower direct material costs, but was partially offset by increased inventory reserve and depreciation expenses.
• Selling, general, and administrative expenses decreased to $12.1 million, driven by lower employee compensation and marketing expenses.
• Research and development expenses decreased to $2.0 million, mainly due to lower employee compensation and consulting expenses.
• The company completed the divestiture of its Aero business, expecting monthly cost savings of approximately $0.4 million.
• Workhorse regained NASDAQ minimum bid price compliance following a 1-for-20 reverse stock split.
• As of June 30, 2024, the company had $5.3 million in cash and cash equivalents, $0.8 million in accounts receivable, and $46.5 million in net inventory.
• The company expects to recognize $2.3 million in deferred revenue related to the sale of 30 W4CC trucks during the remainder of 2024.
• Workhorse is expanding its W56 product line with a 208-inch wheelbase, 1200 cubic feet capacity step van, expected to begin production in the fourth quarter of 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive developments such as product expansion and cost-cutting measures, the significant decrease in revenue and increased net loss raise concerns about the company's financial health. The low cash balance and reliance on future sales also contribute to a cautious sentiment.

Positives

• Workhorse has made progress in expanding its EV product roadmap, including the development of a new W56 model.
• The company secured a Sourcewell contract, which will expand its reach to government, educational, and nonprofit sectors.
• Workhorse added three new dealers to its network, increasing its market presence.
• The divestiture of the Aero business is expected to result in significant monthly cost savings.
• The company has taken steps to manage costs across the organization, including workforce reductions and executive compensation deferrals.
• Workhorse regained compliance with NASDAQ's minimum bid price requirement.
• The company received a purchase order for 141 W4 CC cab chassis vehicles.

Negatives

• Sales decreased significantly to $0.8 million compared to $4.0 million in the same quarter last year.
• The company reported a net loss of $26.3 million, an increase from the $23.0 million loss in the same period last year.
• The company has a low cash balance of $5.3 million.
• There were delays in the CARB HVIP voucher approval and payment process, limiting revenue recognition.
• The company experienced a fair value loss of $0.6 million due to warrants issued.

Risks

• The company faces risks related to its ability to develop and manufacture its new product portfolio.
• There are risks associated with obtaining orders and executing upon such orders.
• Supply chain disruptions, including constraints on materials, could impact the company.
• The company's limited operations and need to expand production processes pose a risk.
• There is potential competition, including shifts in technology.
• The company's ability to raise additional capital to fund operations is a risk.
• The company's ability to satisfy customer warranty claims is a risk.
• The outcome of any regulatory or legal proceedings could impact the company.
• The company's ability to maintain compliance with NASDAQ listing requirements is a risk.

Future Outlook

Workhorse is optimistic about the long-term market opportunity for the transition to EV technology in the Class 4-6 work truck segment and expects EV adoption rates to accelerate in 2025. The company anticipates generating additional purchase orders and revenue while strengthening its financial position. They also plan to expand their product line with new models in late 2024 and early 2025.

Management Comments

• Workhorse CEO Rick Dauch stated that the company continued to advance its EV product roadmap and worked to gain momentum with prospective customers.
• Mr. Dauch noted that while progress was made, the financial results reflect that there is still significant work ahead to achieve their goals.
• Mr. Dauch expressed optimism that EV adoption rates will accelerate in 2025.
• Workhorse CFO Bob Ginnan stated that the company is taking diligent steps to strengthen its balance sheet and liquidity position.
• Mr. Ginnan noted that the company has made significant cost reductions, completed the Aero divestiture, and regained NASDAQ listing compliance.

Industry Context

The announcement comes amid a growing push for electric vehicles in the commercial sector, with companies increasingly looking to transition to zero-emission fleets. Workhorse's focus on the Class 4-6 work truck segment aligns with this trend, and the company's efforts to expand its product line and dealer network are aimed at capturing a larger share of this market. The Sourcewell contract is a significant win, as it provides access to a large customer base in the government, education, and nonprofit sectors.

Comparison to Industry Standards

• Workhorse's revenue of $0.8 million for the quarter is significantly lower than established players in the commercial vehicle market, such as Ford or Daimler Truck, which report billions in quarterly revenue.
• The net loss of $26.3 million highlights the challenges Workhorse faces in achieving profitability, a common issue for early-stage EV manufacturers.
• The company's cash position of $5.3 million is relatively low compared to larger competitors, indicating a need for further capital raising or improved cash flow management.
• The expansion of the W56 product line and the addition of new dealers are positive steps, but Workhorse needs to demonstrate consistent sales growth to compete effectively with established players and other EV startups like Rivian or Canoo.
• The Sourcewell contract is a positive development, but its impact on revenue will need to be monitored over time. Other companies such as Lion Electric have also secured similar contracts.
• The cost-cutting measures are necessary, but Workhorse needs to balance these with investments in product development and sales to ensure long-term growth. Companies like Proterra have also undergone restructuring to improve their financial position.

Stakeholder Impact

• Shareholders may be concerned about the company's financial performance and the increased net loss.
• Employees may be affected by cost-cutting measures, including workforce reductions.
• Customers may benefit from the expanded product line and dealer network.
• Suppliers may be impacted by the company's cost-cutting measures and production plans.
• Creditors may be concerned about the company's low cash balance and financial performance.

Next Steps

• Workhorse plans to begin production of the new W56 208-inch wheelbase model in the fourth quarter of 2024.
• The company expects to introduce a 140kWh version of the 178-inch wheelbase W56 in early 2025.
• Workhorse will continue to focus on expanding its dealer network and service footprint.
• The company will continue to manage costs across the organization to strengthen its financial position.
• Workhorse will hold a conference call to discuss the results and answer questions.

Key Dates

Keywords

electric vehicles, commercial vehicles, EV, Workhorse, financial results, cost management, product roadmap, dealer network, W56, W4 CC, Sourcewell contract, NASDAQ compliance