Workhorse Group Reports First Quarter 2022 Results

CINCINNATI, May 10, 2022 (GLOBE NEWSWIRE) -- Workhorse Group Inc. (Nasdaq: WKHS) (“Workhorse” or “the Company”) an American technology company focused on providing sustainable and cost-effective drone-integrated electric vehicles to the last-mile delivery sector, today reported financial results for the first quarter ended March 31, 2022.

Management Commentary

“We are making progress on our strategic priorities, including moving forward with our revised product portfolio roadmap,” said Workhorse CEO Rick Dauch. “During the first quarter, we continued building out our team with highly experienced executives and strengthening our operational, supply chain and technical capabilities. We also completed our deleveraging transaction that provides us financial flexibility to execute on our manufacturing plans. We are confident in the foundation we are putting in place to deliver electric vehicles our customers want and in turn, deliver long-term shareholder value.”

First Quarter 2022 and Recent Operational Highlights:

Workhorse delivered on its stated priorities from the first quarter by enhancing its team and strengthening its financial and operational position in the following key areas:

Hired talented executives to oversee critical roles within the Company, including:
- Hired a Chief Information Officer with more than 35 years of supply chain and IT leadership experience in the automotive industry at leading OEMs and Tier 1 suppliers.
- Hired a new attorney as Corporate Counsel who brings 5-plus years of business and commercial law experience.
- Hired a Director of Quality with 35-plus years of quality systems experience at large OEMs, including within powertrain, assembly and Supplier Quality and Development.
- Hired a Director of Production Control and Logistics with more than 25 years of supply chain & LEAN systems experience at Tier 1 auto suppliers.
Completed the consolidation and relocation of the Company’s headquarters to Sharonville, Ohio. Bringing together the Company’s leadership and advanced technology teams has already improved efficiencies and teamwork across functions of the organization.
Recently opened a new technical design and testing center in Wixom, Michigan to expand and enhance design, engineering and testing capabilities. Workhorse hired additional experienced engineers with automotive, controls and EV propulsion systems experience.
Made significant progress transforming Workhorse’s Union City plant to become a world class manufacturing center with the goal of starting production in the facility in Q3 2022.
Entered into previously announced deleveraging transaction with High Trail Capital to exchange outstanding notes for Workhorse’s common stock, eliminating the remaining debt on Workhorse’s balance sheet.

Executing Revised Strategic Product Roadmap

Workhorse is on track to execute its revised strategic product roadmap to deliver its electric vehicle delivery offerings through a multi-faceted approach across four electric vehicle platforms:

C1000: All FMVSS changes have been finalized and released. Front suspension design and vehicle bill of materials are completed. The Company is on track to return vehicles to service starting in August of this year and repair 161 previously manufactured vehicles produced to date by year-end. Workhorse will also manufacture 50-75 additional C1000’s by year-end from inventory on hand. The Company will then retire the model, ending production of new vehicles while continuing to provide service and parts to customers with vehicles that are on the road.
W750/W4CC: The Company expects to start production of these Class 4 delivery vehicles in Q3 2022. Both the step van and cab chassis configuration versions will have demonstration vehicles displayed at the Advanced Clean Transportation Expo in Long Beach, CA from May 9-13, 2022. Workhorse has already received its first purchase orders for this vehicle family, with both offerings having successfully achieved California HVIP approval.
W56: Workhorse continues to meet all timing milestones for the beginning of production for this vehicle serving the Class 5 and 6 delivery van and truck market segments. The Company expects to start production in Q3 2023. Sourcing decisions and contract commitments are already in place for more than 50% of the platform bill of materials.
W34: The Company continues to expect the beginning of production for the new Class 3-4 vehicle in 2024.

Additionally, Workhorse has entered into a multi-year referral agreement with ChargePoint, the largest network of electric vehicle charging stations, throughout the U.S. and Canada. This agreement is designed to support customers by facilitating charging infrastructure requirements and providing various hardware and software capabilities and options.

Progress in Aerospace Technology

Workhorse continues to invest in its drone operations and secure key partnerships, including:

Finalizing development and testing phase for market segment-leading payload and range capabilities.
Pursuing additional grants and contracts with the U.S. Department of Agriculture (“USDA”) to provide monitoring, data procurement and analytics as part of demonstration projects. These efforts follow the grants the Company obtained from the USDA in Q4 2021.
Through a dedicated development effort, Workhorse has designed an in-house, market-leading winch with 99.1% testing success rate. Extensive field testing continues.
Currently operating in North Dakota and Mississippi to support government programs.

First Quarter 2022 Financial Results

Sales, net of returns and allowances, for the first quarter of 2022 were recorded at $14.3 thousand compared to $521.1 thousand in the same period last year. The decrease in sales was primarily related to a decrease in volume of truck sales.

Cost of sales decreased to $3.9 million from $6.2 million in the same period last year. The decrease in cost of sales was primarily due to a decrease in volume of truck sales and costs associated with the initial production of the C-Series vehicle platform.

Selling, general and administrative (“SG&A”) expenses increased to $11.9 million from $6.9 million in the same period last year. The increase in SG&A expenses was primarily due to an increase of $2.9 million in employee and labor related expenses from increased headcount and the appointments of the new executive leadership team. Additionally, there was a $2.1 million increase in professional services related to legal expenses. The increases were partially offset by a $1.4 million decrease in consulting fees due to the Company's initiative to reduce reliance on external resources by hiring internal resources.

Research and development (“R&D”) expenses were nearly unchanged at $4.0 million compared to $3.9 million in the same period last year.

Net interest expense was $2.2 million compared to $14.9 million of interest income in the same period last year. The change in net interest expense (income) was primarily driven by a $0.4 million increase in fair value of convertible notes during the three months ended March 31, 2022, as compared to a $(15.5) million decrease in fair value of the notes during the three months ended March 31, 2021. Additionally, the Company recognized a gain on the forgiveness of its prior PPP Term Note during the three months ended March 31, 2021, which was non-recurring during the current period.

Other loss was zero compared to $136.6 million in the same period last year. The loss in the prior period was primarily related to unfavorable changes in fair value of the Company’s prior investment in Lordstown Motors Corporation (“LMC”), which was sold entirely in Q3 2021.

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