8-K: Workhorse Group Reports Third Quarter 2024 Results, Secures Key Partnerships

Workhorse Group announced its third quarter 2024 financial results, highlighting a new agreement with FedEx and progress in expanding its product offerings and government partnerships.

Summary

• Workhorse Group reported a net loss of $25.1 million for the third quarter of 2024, compared to a $30.6 million loss in the same period last year.
• Sales for the quarter were $2.5 million, down from $3.0 million in the prior year, primarily due to a non-recurring sales allowance reversal in the previous period.
• The company's cost of sales remained flat at $6.6 million, with increased material costs offset by lower inventory reserves and labor costs.
• Selling, general, and administrative expenses decreased to $7.7 million from $11.8 million year-over-year, driven by reduced employee compensation and consulting expenses.
• Research and development expenses also decreased to $2.3 million from $5.8 million, mainly due to lower employee compensation and consulting costs.
• Net interest expense increased to $8.3 million due to fair value losses on note conversions and financing fees.
• Workhorse secured a three-year Master Framework Agreement with FedEx and delivered the first 15 trucks under this agreement.
• The company also received a General Services Administration (GSA) contract, enabling federal agencies to purchase Workhorse vehicles more easily.
• Workhorse's W56 electric step van achieved 31 MPGe in a delivery route test with FedEx Express, compared to the 7 MPG average for internal combustion engine delivery trucks.
• The company is designing a 140-kWh battery option for the W56 chassis with a 100-mile range.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positive developments such as the FedEx agreement and GSA contract, the financial results show a significant net loss and declining sales. The company is making progress but faces financial challenges.

Positives

• The three-year Master Framework Agreement with FedEx is a major commercial validation for Workhorse.
• The GSA contract opens up a new market for Workhorse with federal government agencies.
• The W56's 31 MPGe performance in testing highlights the vehicle's efficiency and cost-saving potential.
• The company is expanding its product offerings with the 208-inch extended wheelbase version of the W56 and a new 140-kWh battery option.
• Workhorse is managing costs effectively, as evidenced by the reduction in SG&A and R&D expenses.
• The company is actively pursuing new purchase orders with independent FedEx Ground contractors and other fleets.
• The company has an expected payback of less than five years for EV step vans based on data from its own operations.

Negatives

• Sales decreased to $2.5 million from $3.0 million year-over-year, primarily due to a non-recurring sales allowance reversal.
• The company reported a net loss of $25.1 million for the quarter.
• Net interest expense increased significantly to $8.3 million due to fair value losses on note conversions and financing fees.
• The company had only $3.2 million in cash and cash equivalents as of September 30, 2024.
• The company has a significant accumulated deficit of $832.2 million.

Risks

• The company's ability to develop and manufacture its new product portfolio is subject to risks.
• Attracting and retaining customers for existing and new products is a key challenge.
• Supply chain disruptions and cost increases could impact the company's operations.
• The company faces potential competition and shifts in technology.
• The company's ability to raise additional capital to fund operations is uncertain.
• The company's ability to regain compliance with Nasdaq listing requirements is a risk.
• The outcome of regulatory or legal proceedings could impact the company.
• The company's liquidity and ability to meet financial obligations is a concern.

Future Outlook

Workhorse is confident in its ability to generate additional purchase orders and revenue while strengthening its financial position. The company expects to receive a larger order from FedEx in 2025 and is working to convert positive conversations with other fleets into firm purchase orders. They also anticipate adding Canoe, Sourcewell's Canadian counterpart, upon completing pending certifications for Canadian vehicle sales.

Management Comments

• We continue to make steady progress on several fronts here at Workhorse, said Company CEO Rick Dauch.
• Securing a three-year Master Framework Agreement with FedEx is an extremely important and commercially validating milestone for us as an emerging commercial EV company.
• We have already built and shipped the first 15 trucks under this agreement and believe we will earn a larger order from FedEx in 2025.
• Im excited to announce that that we have been awarded a General Services Administration (GSA) contract, which further expands our reach by enabling federal government agencies that desire to purchase our vehicles the ability to more easily procure Workhorse vehicles.
• We continue to see the industry slowly, but steadily, shifting towards zero-emissions, especially in California and other key regions across the country.
• Workhorse stands ready as a capable and reliable partner to help businesses and government owned fleets execute on their sustainability initiatives.
• We are confident in our ability to generate additional purchase orders and revenue from our customers while strengthening our financial position, said Workhorse CFO Bob Ginnan.

Industry Context

The announcement aligns with the broader industry trend towards zero-emission vehicles, particularly in the commercial sector. Workhorse's partnerships with FedEx and government agencies position it to capitalize on this trend. The company's focus on last-mile delivery also reflects the growing demand for efficient and sustainable logistics solutions.

Comparison to Industry Standards

• The W56's 31 MPGe performance in testing is significantly better than the 7 MPG average for internal combustion engine delivery trucks, demonstrating a competitive advantage in energy efficiency.
• The company's focus on electric step vans aligns with the growing demand for zero-emission commercial vehicles, similar to companies like Rivian and Arrival, though Workhorse is focused on the medium-duty segment.
• The GSA contract is a significant win, similar to other EV companies securing government contracts, such as Oshkosh Defense's USPS contract, though Workhorse's contract is for a broader range of federal agencies.
• The company's financial results, while showing a net loss, are in line with other early-stage EV manufacturers that are investing heavily in R&D and production scale-up, such as Lordstown Motors and Canoo.

Stakeholder Impact

• Shareholders may be concerned about the net loss and declining sales, but encouraged by the new partnerships and product developments.
• Employees may be affected by cost-saving measures, but also benefit from the company's growth and new opportunities.
• Customers, such as FedEx and government agencies, will benefit from the company's zero-emission vehicles and cost-saving potential.
• Suppliers may see increased demand for materials as Workhorse scales up production.
• Creditors may be concerned about the company's financial position and ability to repay debts.

Next Steps

• Workhorse will continue to work on converting positive conversations with contractors and other fleets into firm purchase orders.
• The company will continue to manage costs and improve its financial position.
• Workhorse will continue to expand its product offerings and partnerships.
• The company will work to complete pending certifications for Canadian vehicle sales.

Key Dates

Keywords

electric vehicles, commercial vehicles, last-mile delivery, EV, Workhorse, FedEx, GSA, W56, fleet, sustainability