WKHS - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, greetings and welcome to the Workhorse Group's Third Quarter 2017 Investor Conference Call.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Duane Hughes, President and Chief Operating Officer. Thank you Mr. Hughes.

begin. may You

Duane Hughes

update CEO, and for Danielle, quarter everyone. a Officer. appreciate quarter. moments, on Paul We third our business joining call going Gaitan, Thank morning is us time good to all our few a taking for morning. third our to the brief Burns and be from you is this you, In Financial highlights morning, give on you Steve this Chief on the update Also touch the our call

may have our you market seen, As XX-Q we and earnings opened. filed issued the our release before

part For forward-looking those website report, at have that statements safe your seen our it want I our our to call of XX-Q you who workhorse.com. attention on for is provision available to not content harbor may results cause statements. our provision year-end and on The update. website the harbor actual that is posted from identifies of our factors materially of our risk forward-looking differ is to safe

-- periodic our business. XX-K further risk to and related Our the file factors detail about sorry, provide filings I'm other XXXX SEC, with on the Form specific other

For He you to it over then Steve on an to today's would up will I With Burns. questions. that, open turn key strategic the Steve call, like will our give call Steve? priorities. to update

Stephen Burns

Good Thanks, everyone. Duane. morning,

announcements. As company excited relating discussing about we're to Duane very mentioned, our some of recent details the

technology-focused any manufacturer, reminder brief transportation mobility for comers is commercial new and providing for sustainable to today, cost-effective a a sector. As the call solutions our Workhorse electric

goods harmful environment. the and movement manufacturer, more and and trucks high-performance vehicles design build make we All As original people less aircraft. to and efficient equipment an American our battery-electric of Workhorse

towards XXX as operations. several this units quarter commercial the the that quarter of on we delivered results, important we third UPS. E-GEN achieved from we Moving 'XX, to of scale are order our XX In milestones drive

in this quarter order this in XX units vehicles XXX the far third the to-date, so and quarter, XX We in have X fourth delivered from second quarter.

United more Service. including delivered all vehicles our we States Postal XXX than Workhorse to of the customers, Additionally, to prototypes the

As we us where a Perhaps in Tier and with capacity volume margins our Both our help rate these many An both our of manufacturing our that metric on a service automation vehicles per working timeframe. transitioned operations introduced to the more QX efficiency a telling part 'XX, XXX know, forward. and that Ryder previously of to deliveries, of of current of possible will going primary improve increased professionals. increasing X that run X.X service this provider result that orders commercial day, for facilities the rate we've to of support suppliers. building most vehicles and be and is show scale sales already day of to have improvement per from as run Workhorse. we've network. fact our important X is announced end, XXX distribution, than To maintenance you over fourfold Ryder the more has and and sales improved

read in In first closed earlier you W.B. have an that's as its Ryder customer, fact Mason, successfully may announcement. already Workhorse has

With in the win the United discuss to testing recall, our advanced next we as USPS said for vehicles to Postal to our are mid-September, in Moving we the on to phase goal opportunity, USPS the Service time program replacement specific limit program. can program's our vehicles have though we you ability that tell rules potential in prototype delivered and States any replacement XXX,XXX that ground you under detail. may this

an of roughly that for average have intent or W-XX you $XX,XXX. trucks than successful of a more May. secured since we XX pleased may our I'm electric X,XXX in more W-XX of letters recall Some from pickup with unveiling report also highly truck to price then of fleets

of production. partners as comprised Council, development Leadership engineering towards who important W-XX through continue loop provide we the an will team advance convene formally our feedback our to will LOI we quarter, for This

interest We available. strong fleets are continue a W-XX to production when receive who purchasing from interested vehicles are in

the several requesting purchase demand have thousand from to we consumers, commercial actively from received In fleets, inquiries growing information. addition

continuing As the we have appropriate the said into the timeframe previously, for we and consumer to are evaluate launch market. strategy

lightweight remain drive, systems the the our that optional future ultra-low we platform floor mounted van. turning now roof Office of delivery van For existing million N-GEN radius, from best-in-class is mile we with that developed XXX working product commercial our focused believe well fleet be new avoidance our N-GEN our Today delivery market. platform an nearly E-GEN our the collision last this and gained We delivery. delivery materials, on as incorporates all-wheel miles announced degree electric customers. cameras, X for Post was leverages vehicle of delivery HorseFly drone. as This to experience

commercial consumers this OEM. XXXX, to we and in next in to XX offer want as largest be systematic operating the truck will volume also decrease defined N-GEN are be U.S. to contracts This than to now cost path this This commercial, For fleets further production compatible with as controllable approach mile and and their commercial the our a sold efficiency. W-XX and N-GEN driver and were positioned and size gains HorseFly who With over more regulators, electric and to to we U.S. truck scaled will leading well delivery this growing months. segment comprehensive vans XXX With market. drone of vehicle is traction increase disruptive our van portfolio, positioned the fleets. last the well

in that of will place when We capacity suppliers in proper our are continue have we discussions needed. suppliers key active with assure to to Tier expand our network X and

personal mentioned VTOL to potential validating bit our vertical We're our merit. SureFly platform SureFly the same at our we market Since time about partners, have manned on have SureFly our product. SureFly previously, the the January. have bringing or Huber is are previewed we the technologies planning have first and that customers, new received disruptive significant to from in interest Lastly, this talk and opticopter. want SureFly our takeoff Air I into the electric we market, is for entry stands to frame. a Paris CES VTOL we landing. flight that the emerging at outdoor media, booth about test Army, public And our our on approach and platform our as show Show,

XXXX exciting method We near-term of with experimental preorder that a to FAA the and happen working certification electric expect towards are and this customers taking Also transportation. in and deposits working towards we that new we -- have late FAA, started certification. for the we full we're from

questions now Let me with up open the to Danielle. line

Operator

you. Thank

be session. [Operator first is Cowen. live. with Our a proceed, question-and-answer Instructions] Jeff from question Please comes now We conducting will Osborne line your

Jeffrey Osborne

reductions, materials I some think, Thanks, that certainly basis hoping quantify about could platform. progress suggest just that morning. Steve, But a automation as kind suppliers you E-GEN as the well the I there. good you you're several of bill questions the, talked on would was Tier potentially like-for-like making had I of on X just just

and foremost trajectory cost of you to taken like over cost the lightweight out time, then that maybe look just additional that of company you've what future? is to platform materials of out just about, how if take at migrate gross the in of UPS we N-GEN to of that types First been potentially platform, automation we at and folks that much some the the margins you look talked as were given others able and the as platform? And

Stephen Burns

Thanks, question. Great Jeff.

not there's that's crash margin they be are earlier is a break materials to even and forward produced gross that lot we now. and in testing suppliers, a our where volume, that E-GEN, R&D like We from vehicles we labor set less we even products A point a on going of announced all existing our say least, things That's sights general on volume these bill a we can we are what the through to of business to lot going incorporating forward. of of but get on. not E-GEN, which our both have they orders though just expect view, even are bulk low higher X that and we at have existing relatively more Tier positive goal at after and because the in for the reliable comes of are expensive or right

a like down combination it's Bill and which it from know, suppliers of for comes us. come more materials it's as beauties working And economical getting a a smaller all more the light efforts constantly our your volume N-GEN, from comes a of because lighter battery is but of automotive vehicle, of this so And is saying margins in you the there. all make from of with weighting a we engineering that lot materials. where And deals mass are to combination bill of volume of the materials requires to in we also lot there addition aerodynamic. of the can it and reducing how ourselves

the N-GEN gross early just So materials positive. even on really of point view smaller terms, versions expecting at a the of bill be margin battery we're to mass flow cost these a money with of in really and least cash or general

Jeffrey Osborne

So so to several you a the acquired Indiana that don't thousand that, just to needing vehicles facility to we be following margin year up positive? gross on have about think

Stephen Burns

of we the Office -- idea we -- emissions in to the for are a then keep be far lean Correct, point can going as of for existing the both trying designed and machines as be so possible. point keep let's that and start factory And from the that get that, operator of factory efficient want major to view of without our path we of design this make and truck fuels that. man, point also it and light kind realized a built Post blank was of Once a view hard paper changed and to conceived we're to something to that CapEx, as be to our really able delivery sheet most and genesis really by them and pickup maintenance view. a just use with it let's would

Jeffrey Osborne

three other. Good. I just had

that think the conclusion you've briefer prototype testing still of may. But you that will Service, this answers, a if I that spring be Postal you you've done do on it submitted? anticipate being

Stephen Burns

Again, restricting them I spring. can said but they think to are test what have through expecting Office we say, Post really that we're the themselves

Jeffrey Osborne

like 'XX, with and of to production? And the gating at the importantly of components what sounds for or the are would at W-XX is the there, materials just of Certainly it start more have I investors intended itself, of factors the be versus suppliers this to guess, entered few what but negotiations you. you think, identified end the the point Got percentage is demand side I production production the side? bill equation you start last

Stephen Burns

parts, leverage we trying the again vehicles. key all are our well to Yes, all across

all SureFly, own the core component Panasonic we trucks key put the vehicle we one make, HorseFly, control into So those every packs. packs we of development our That is across and the the cells. the

that that with sure row reduction is our our vendor we So make the we and have pricing. primary

the are biggies with do didn't body, vehicles that other the any chassis a the is the composite bought The and us new body Navistar, of it's bodies. existing we manufacturer, bought, we to

made profit which per gives us the the cut with deal So our not as the us body we're cost our This makers. their of enables because body is maker. sharing customers more -- typically well our revenue bodies and are body, first the vehicle control to by a control more with the

the guess, we have ducks in key vendors all with So is these vehicles, row. required I a for our the short answer

Jeffrey Osborne

were just, is quarters, any bit do the with And next couple was Got of R&D that expenses through the one about it. higher that were R&D? quarter flowing than items -- line this there we anticipated, how just And think one-time last particular? is in the

Stephen Burns

little it, surprises was few if a of deadline ready get we down end, had the close to as got deliveries. to quickly. bit get had a the we spike somewhat R&D, the you common the up we to for There to there, towards button Office make Yes, Post probably a

is expense R&D with So surprise. vendors and caused the that what third-party bulk of

Jeffrey Osborne

for up go it we a Postal about, of through or or then million, testing W-XX? we be going and somewhere should do there think as normalized million Is at kind range $X.X level a the the may the $X Is to in you... be that quarter Service gear that

Stephen Burns

of The its dramatically detail. is first is say We'll starting of quarter. I don't though delivered R&D. That production kind can know the USPS now have forecasting if that course, I coming N-GEN reduces we out. in program we're

to So W-XX get that the is the for us. that ahead easier road because is only of vehicle on

into So that, less the R&D the but and to utilizing relative there the Office. Post for a we work is put truck, because pickup some R&D much and we're time all it's

first. is out leveraging leverages and into the nicely because most. some last pickup you'll they're over few come up time pick towards the the of to that truck is work a that will the year years, with one the vans into enables Office the R&D probably end will But that So still of the associated the start it That of the see big it, pickup have to really -- on the tail the some Post the one R&D that where into goes delivery all both -- it N-GEN and the truck. and lot largest

So not we're to really trying waste anything.

Jeffrey Osborne

all details. the appreciate Perfect, very Thanks much.

Stephen Burns

you. Thank

Operator

comes Rusch Colin from Oppenheimer. Our with next question

Colin Rusch

I've much. around questions a just so got the of Thanks capital. couple working

the healthy at about million, many running parts suppliers getting bit at vehicles we $X.X around how bit we how can you're then terms a think about payables pretty And a just that and are just is numbers little a So you the you go unwinding supports? little inventory as should about those your can little that level, bit with talk the forward? talk X

Stephen Burns

to want that you Paul, take one?

Paul Gaitan

Yes, QX, inventory sure. cost come say that the for been UPS I vehicles a per $XX,XXX, seen had you low XX kind vehicle. piece. the which our look The at is that and way delivering unit to of would average at look best we've with up there, of on

that suppliers who them of cost taking nature, we as better working divide a And take call in it, pretell folks that quick and inventory of in getting envelope it I'll kind XX,XXX on to because our you our, yes, early are [ph] we the cash and of terms, as the be vehicle, a that. of So content ballpark kind level, have a in the about with the the as development are and highest can process way in back the advance. of then think far required lot have the

advance build is continuing and a getting off work say be them XX%, up terms longer. trust reduced terms level, reliable cash something the or with to some as that So payment like on stream, them in we pressing are balance a we then and to XX-day may toward

Colin Rusch

customer helpful. then a easily those the engagement technology, market. to that's super the going technologies terms And going level you platform, accommodated sorts potential material in that's interest clearly need should think N-GEN And with be level in is which about Perfect, in how how design? of, X with X Can forward? to of talk your [ph] integrating XS we about

Stephen Burns

leap. I like, it. what on fact if guess, the sectors Duane, I'll that vehicle, one. volume for scratch that its enough think start from there in, really It of that a warrant jump across and can all is we you represents last like nothing quantum anywhere. The dedicated own stems purpose. got is There's kind mile you from design that really delivery out N-GEN

bond those built or delivery say, folks cables, as or sellers a If they use is plumbers the sprinter, for you or vehicles mile a it look at are well. let's in class N-GENs typical transit, for -- are which last

is that general every vehicles good is, of just purpose vehicle it's general what for like purpose kind everything. it So

low saves the out XXX So and platform have times that we a a to getting right, floor huge deterrent delivery be for day, this with knees, example, folks. seen in

pretty on heavy All these delivery we're we vehicle vehicles anyway. of for the -- truck, is to we're with it our into in and vehicles have that that it consider the do are the to typically consumer crash at, vehicles, them putting pickup avoidance luxury because systems stuff and we vehicles be looking road

see, autonomous, example, sure to you SureFly is initially all the of putting all to being in trucks, built be heavy driving. hardware that that can't be out course, without automatic It's state-of-the-art in can. to for and new in the ask we our for looking like, a there as full-autonomous OEM, And in it. is braking in, best to there, so already, But our many opposed the the in going autonomous, autonomous an if of for to at though sensors the HorseFly initially steering, of of is all Even stuff to our trying as trying do are if these moment we it's come we're our can vehicle -- we heavy piloted upgrade you we -- with put as at already. do we this can as us trying vehicles at customers are make bulk that upgrade, what braking, the trucks, this components the going

Colin Rusch

the really Mercedes the just from any with has And about also a that one, you've done final only a Can on in delivered. close you the any being really the you've in area innovation this very relationship number working these thing of know that's got with work area on your of was they and been bit helpful. real Excellent, whatever were that little a market, I packages talk and with a folks. customers? we've that load-in seen focused

Stephen Burns

Yes, looking the if it. at of back low you're that's the floor,

completely flat. the addition completely From wheel, In all just low, to be it's from flat. back it's steering -- so tailgate, to the the way

So it's great.

sitting sitting are to Getting carts. Some half in, have carts is case of difficult. vehicle, the roll times very, you're kind half position, main people up when sitting you XXX is we high you or thing you like a drive shelving are of want shelving half a day options want all different and this The so a you shelving very standing. mix full in from

wish we've on vehicles and couple are geared list. a done to just getting customers of So new from miles existing learnings their of this it's lot that just talking that having space towards all our a all the and into million

which time design. work we from -- just of Luckily from done Office, needs. the thought basically had bulk the we the scratch the So same Post a has for a it was

Colin Rusch

guys. thanks Excellent, Okay.

Stephen Burns

you. Thank

Operator

comes Riley. Driscoll question Carter proceed. next with Our from Please B.

Carter Driscoll

of working layout Hey, talk if route typical economics, looking it morning. launch a terms that see in improving I'm to the where see is for product? how couple could questions. greatest you maybe taking the questions your the the you're case as a particular just landscape Thanks of think, model of route wanted about about cost on competitive trying about And I ask delivery I because payback in or sense you think use efficiency get to, good savings my where you're fuel you the and of coming competition to a you to HorseFly, that? value higher and

Stephen Burns

exciting the think, the route the invention you Naturally optimized Great been has it. as do question, you can optimize because as years essentially it's delivery of much that's optimized, HorseFly it, been it's really as has XXX as much truck, internal optimized about I essentially, a combustion because driving internal since door-to-door. the person ago, combustion been been can

reduce So and more emissions on. we have vehicles full chains more building economical the what that's last spent from fuel maintenance reduced and and sell XX that fleet for we the our customers to use. importantly come years our drive now And trucks and are economics

kind working are there this in mile maybe, is There and per fuel on all this delivery more last package we maintenance. time, cost the and wrong driver problem are However, of again, we it on to us occurred typically, than focused because segment. is

effectiveness excited the being engine, to fleet more have best as as eliminated while the efficient more our efficient So efficient, are very fuel helping we internal times reduced combustion customers. or can cost dramatically emissions bring and driver that we X we're

down has plop example. So to I the driver parallel in is long and driver half a mile for walking delivery that arm of a elastic think another SureFly, as the a something it arm, can and while the just

robust. easy is to has to to up ease-of-use that. that with has delivery has use, and folks be super driver through coming critical all -- deal is automated, it it really We training be folks so it time DNA to our And these completely be up and

vehicle. it sure get All a redock, component, it is to have unfreeze path, a for is scratch us of what bird it is doesn't it even we sensors battery the where motor that's to and a key vehicle, flight Battery the very, that. freezes waits crosses course, from of a having years HorseFly, top on we it. So control, it the very automatically, hit, couple took to difficult, the of do, if in developed developed on make driver its that

launching will I in further current trying really So regulations, further like and the are in of it trucks the right we're last XXX as can that looks following within looser top open America, if of day be a which those does, something. know, and line really envelope of couple we think are we permitted, of now, in it the to this you've up deliver don't might this on represents even the sometime first kind XXX site business during home of we HorseFly of -- comply But be to with ubiquitous help. now, been every throughout will the getting it weeks, new and years. truck, way they Again, and the and America,

So about quite excited it.

Carter Driscoll

competitive Thank lot you for that development on words be the in are? path the far some of competitive of other competitors hearing noise might the true couple landscape maybe a of versus that from as along people just And as that. not of in a potential terms we're you

Stephen Burns

can and currently. a truck launch we know the off one that we only from as take are far As

I I yet. doing to think has think, Mercedes don't that, said but they'd it they're do like

of pending that. not line wanting removed. granted lot process We have to for a restriction are that it's the we is yet, folks strong, There we of the progressing pretty a but government sight patent think from through that are be

they fly a bit suburbia out a that's warehouse, XX back. from drop come to and package We -- away. don't can a we miles it think So to

XXX, doing anybody, like we'll to believe least, that. and runs deliveries. but of United that with active things some kind specifically that actual the at this medicine first be package States been built So aware the we in America of There's that not do is deliveries, the to we know in we comply don't anybody, we and test are

Carter Driscoll

customer timeframe missed it, about did the first you I if talk for delivery? sorry, I'm

Stephen Burns

that Christmas going year stated early to this we're not, If to the year. try do have next season. during we'll do it it We

Carter Driscoll

Got it.

in gentlemen. Okay, I’ll queue. get Thanks back

Operator

question next with Our Management. Capital comes Moon from Hart Bill

Bill Moon

have questions, I may. if Hey, a guys. I few

First, to the in to that indicated regards get explain cash go Can and you that on cash March you with cash much the You from burn factors you have be your should level on guys March. with hand? how cash rate you good current hand? until

Stephen Burns

Duane that want you to and take Paul, one? guys

Paul Gaitan

Duane, you want take to that?

Duane Hughes

You'll jump to. I start, I'll in need if

Paul Gaitan

We've of on -- that level done a detailed Postal Service analysis are out, pretty platforms, continued opticopter then, what is. of our different And all figure burn development floor of to as specific kind overlaid amongst and not. of course top the programs W-XX the what are

to it those much want that quickly we pace overlay company see how what and how the on of how based and strategy evolving. the forward, and we on we at demand So all projects market depends move

Bill Moon

but guys. -- is logical a still you Okay, guys that timeframe for you

You have March? enough hand cash on until

Paul Gaitan

to had over support number a that and decent during spend any cost bit that Service, and we're changes that that approach is the into the the necessary. Postal certainly us. think we I'm aware earlier, Steve -- didn't getting going to themselves. opportunities not we to of committed how level quarter had that little I fully Obviously, to premeditated a But spending as carried mentioned with was present whatever of that October. much And

Bill Moon

by complete that completed to be well like to mean given And next, Okay. Are pretty run quarter-to-date guys are guys rate, expecting current that? the seems your end delivering order. on XX I it that then you of QX. you current looks

Stephen Burns

Paul put jumped their to put all Yes. in there, little build the because there customers, -- a I to that's end folks this year, expecting little really, busiest all. we I time. a because swamped them we a little on their have am but the delivery our will asterisk -- them quarter. get build of have sorry, We to We're during

have of last So little we But if built. all are all can weeks. absorb January, X them it a can like a but have put they we build asterisk all -- now. assuming them, that customer bleeds they of into if so we're absorb those week we'll to or our couple But

Bill Moon

Okay, kind then about customers. great. prospective current conversations or of just talking And with

kind seems so over X you You kind road efficiency guys worth with And high in level, your customers how can now, conversations numbers existing now? dotted that with on are the Can what to a what the to, have the these you are are have of, order transforming walk it like up. these for are on sign kind prove through customers line? of finally from, new to on conversations and million viable your looking back miles and the vehicles just, of

Stephen Burns

Duane, to one. that you take want

Duane Hughes

signing many vehicles the right dotted go depot, determining engineers will an are and you we I these Bill. how want as plan can where on thanks sending out and infrastructure biggest locations on each tell Sure, so on one you fleets the obstacles that the these because they deploy to if defining talked et in assets, line, would, they have cetera. still is internal the of as process, about they're past

don't vehicles real in over The they have XXX So which adapting with I'll need say any the is fleets performance put are many They -- These currently and of to you speed in they key well the The us tell X place their terms over as the vehicles vehicles. vehicle say, million themselves. concerns, proven. in to the to well miles. are proven. infrastructure support

incentives, customers more quickly. we close order utilities with well sales delivery more fleet basis, from end as conversations a in value been, ultimately partnering place utilities number financial the operational together as who're that and to should infrastructure touch as and more rapid with market the well. which of on the to as will to our the say, I'll as create Ryder So well have pre-order also in help on putting W-XX being customers or able put to us I coordinating

first their customer, closed Masons, just W.B. having vehicles. our Ryder course, Of with

we a the training in We line path sales at of in are -- the with well are people Ryder.

So see pace additional sales as pickup well. Ryder's we on expect to

Bill Moon

Okay.

with have this backlog UPS? will is you that So guys have -- complete strongly guys the once last believe guys you you order

Stephen Burns

Yes.

Duane Hughes

will generate Steve. we Yes, go -- ahead

Stephen Burns

N-GEN some money E-GENs. right, our quarter. lose still margin There on again commitment vehicles next wise those but Again, starts with even any E-GENs, not -- to going forward, gross be trailing will on

how have really those worried our on be keeping to not about we so specific build busy. profitable. But factory We they yes, are we're

Bill Moon

you, great That’s hear. Thank to guys.

Operator

question next with Maxim Kinstlinger Our from Group. comes Brian

Brian Kinstlinger

I much. price but of gross calculated that on the than significant a goods A If of XX, which different cost sales you follow-up Thanks $XXX,XXX, divided versus $XX,XXX. take drop is average so I margin. the by got

curious a be comes that order you just profitable. if new So in I'm and for you'll mentioned some E-GENs them, still sell you'll

about So is vehicle. where I you on ago, $XX,XXX per about then the UPS, you $XX,XXX I target per a year side, will talking what of vehicle talk outside think, as cost price the know were do and

maybe about it economics change? the how there will talk So and

Stephen Burns

this layering command it Good continue we N-GEN, so as so a again and of to higher going truck that Brian, Post question, bill is the things bill and can got Hi, prove But fleets, means we believe it down. to for X million the money, can lose to now it in miles we we mandate internal refine material has not economics with we're to this also the Steve. the brings pickup that price. that on of the material E-GENs Office, from

on ride be is clear, going end believe vans we're as things to two do mainstream far of But of W-XX pickup it the as with want truck. those our then in course, expecting and horse and the year So to I kind going we to cross the be of to be the E-GEN the that N-GEN towards those. we're profitable

Brian Kinstlinger

Great.

look as today? target on at what it year you you question average at initially then be vehicle do you next the looking per So think, as similar will N-GEN. see cost maybe is you're the a price and What

Stephen Burns

that but know don't I it, think can N-GEN. stroke $XX,XXX we've broad I for do stated I a say the and

what's Now you is chassis chassis, well, the the body. in chassis, E-GEN to for your but range including say vehicle is that while to be your former -- important used in mind keep total as that

was which use body $XX,XXX. anywhere round So to and they'd of number between top our in chassis $XX,XXX, a put a let's say just have E-GEN and on $XX,XXX world the it, to then was

physical a the uses at we're much So selling that lighter it's margin expecting expect profitable be and to profitable, battery rate. gross smaller less we such it N-GEN so materials, and because

Brian Kinstlinger

Is $XX,XXX you to cost? that delivery were not saying? what sales right

Stephen Burns

Correct.

Brian Kinstlinger

e-retailer, And change. about to ton with Great. to discussion delivery and it past seems then lowering pocket trucks been in like Wal-Mart. there's buying mentioned a cost And of talks Amazon you them an the me is for five

talk you where any N-GEN trucks discussions the maybe matter? or can that or for trucks about for e-retailers piloting these are about retailer So

Stephen Burns

that I but -- I are and all tell everybody companies, XX right, logistics Fortune kind Well, changing. how I these are the e-retailers, that you the be, Fortune realizes they or is don't can right, companies, know specific can of -- XXX

the So really been because it and business a that E-GEN that conventional understand a to HorseFly. the have both in their players know they to we they or really an doing cater want appreciate changes time long for bring an and N-GEN

in some the the the deal like these of However, seems we truck, into new all five right? also a although order It's interest players placing garnered trucks, it the infrastructure have logistics change more discussed, new a marketplace. And system. of to as vehicle it's of we cost their much than pocket from of great

the safety fair I we So it. to with -- but we test -- about getting the And you, just system. a from systems system. and light we're just say an we're can we couple ever of those was integrated is tell drive from I one new and there's and into and interest it's board. we've folks tightly I telematics vehicle scratch agreement aren't and and are been excited announced all-wheel build, those drone old The customers a since think this it mean of like are it new the very, low all and built. business, into very signed for cost afterthoughts -- nothing integrated And the receiving weight a -- across cities that the floor this and this

Brian Kinstlinger

building at look e-tailers the Or that and level good yet? begun not would e-retailers, if out than to a you significantly customers look follow-up really if to that then companies So question in other you has UPS a at are occur those your significant infrastructure? be

Stephen Burns

like infrastructure? mean logistics infrastructure you Do charging or

Brian Kinstlinger

begun They trying process that or have infrastructure going accept to they're they curious, to you're for can't e-tailers infrastructure, right. if not trucks has your the so accept, customer that to Charging them, sell I'm of charge the outside UPS can't into? either base

Stephen Burns

smaller to up, that. it all or people tell because of course. lets a infrastructure all anything the trying you comes why That's a not to them extender going about that infrastructure I range can and have we're They're like a of worry option that are we customers our sell into, like, in? brownout where plug lot these like Right?

in don't them add infrastructure and Let's these for put slow the vehicles, But -- them follow is wait go. want to we to you was that's to infrastructure Duane infrastructure kind because up. and now as number system of as catch the or plug discussing, put their them in

it if it so if faster. can plug you -- XXX, of gasoline, a even we're wanted it's you you right, right if And get So on into run vehicles all, right? Volt there, you like build charge right, Chevy it it trying But run to a but didn't of efficient plug bought you that you at a could can into if out you it, it best course it now, charge vehicle. to, very the XXX

asks the extender kind of and range want we're wait us that we the the the infrastructure. build don't to because that question number all-electric the logistics back one person you to But -- why So for that's when to a is don't just we approach taking infrastructure hold want electric so We same vehicles. versions. say different and

Brian Kinstlinger

Yes.

Just a couple of more.

may XXX sorry. all, from of EVs earlier wrong, week, pronounced I have Chanje. this that purchased First Ryder

their weight use vehicle? the times what know yours. the First, primary I it's is of of X

need Ryder well? -- mean, Ryder through any from please. purchase go inventory Workhorse is maybe does that as to I Second,

Stephen Burns

Sure.

I call probably. Chanje, think it they

a twist, -- not We W-XXs. With ours preordered or in our believe may be so. X,XXX think bought I as with you I vehicle. superior. vastly to Ryder But remember, to may X,XXX a wouldn't want J there. compare

in think XXX has to very expect, of did expecting customers I understand. that, to they because we they come their we with have an Chanje believe vehicles, we the kind quarter seen bought. rollout But like inventory more lightweight from we that. start we take Chanje electric that we've those of of modern we're a a initial that's van, But they're have is has as But version some so or else don't sell Ryder a somebody reason -- The Chanje what in valid vehicles marketplace. the the we than and lot production either So preorders first to N-GEN, yet. of and not orders

Brian Kinstlinger

space. Great. I are don't Last you holding the have, think along is often your making partner different an of back from one all I I questions financing these part. can a think question of hardest anyone others I what EVs get path been argue the has in that I guess, your further most investment, development of is than strategic as

So a year what you've has years, the partners, been to for Why because probably last strategic I seek out and Workhorse? invest the not back? elected they half in has what think push have

Stephen Burns

have have times, we we offers this strategic we I not that that to us, down, said right, from think partner be turned Well, it's very partners valuable have a And strategic Obviously, I attractive. feel several we're didn't we had right? mean, -- to right? say, important would

an this conventional or expensive been folks your That to lot capital somehow intensive very a not but it -- scares a that's business, have a typically deals. a it's very business. right? feel compared become a that, sooner lot penny to a close is going opportunity one had automotive of dollar it's a we've to So miracle, tricky We is of able away, as very a cost. good automotive job, never strategists like -- to do process. more for it's of We those thought later, And on

we and takeoff we that exciting see getting XX Startups vehicles So that milestones make markets in exceeding new are are of getting market. for we've funding right, in are years and VTOL SureFly, are the producing, right. landing Workhorse. these as what entering kind far funding like raised we Vertical people all for

the driver we the that So it mile I lends in itself happy discussions We put on them. on are and believe some as road, risky for happy strategic, we think strategic every with a not we road, finding lowering risk customer, we every are get. every vehicle just the we to for are right hoping to put that the it's all actively really and

Brian Kinstlinger

Okay, thank you.

Operator

Largo with Wells comes Fargo. question from next Our Paul

Paul Largo

questions. Steve, Paul, my Duane, Hey thank you taking for

it article believe, provider getting large e-commerce with a did as drones. there's but that? piece Steve we soon and recent Regarding then, next more release the as on bit, or an with news with a press came interview that specific know the mentioned year touched a N-GEN, And I out, that Christmas I was you than in miss those anything was little it on involved you

Stephen Burns

people it early its through will us make it will we to want Pack No, stated sure drone in earlier Expo believe year. it in deliveries. delivering we -- our of for have conference, because we are be we were we not we who towards someone delivering work at drone a year. a is, the And be end via likelihood, this start actively all that and we conference involved will said And the as

maybe. Workhorse so year, -- gets deliveries, the start via still this whole and believe our it end truck this drone, we So Again, next U.S. if busy tail that we don't it delivering in will but certainly, just white a year pull up of real space, make in year. early Christmas

Paul Largo

few significant, XXX time this at I months. E-GEN. maybe, them units and in evolves? that on you're terms the guess, these your that when City I up. particularly portfolio year, products Okay, thank your ramp the probably or quarter, about at currently point, you like, has in a It the it past envision Union developing majority it City, you. And Union been next safe Is in ramp all the as looks touched of N-GEN to you think up was for And say of

some that be the once are completed, that to So orders we order in -- the is will there UPS with close a sales? line potentially gap need have with or flow

Stephen Burns

of extra in here, And gross every we've positive that's what and sales in. You the to added you've busy vehicles. revenue to keep complexity to margin to folks on got the Well, crossing manufacturer balance, keep has line coming your these over and coming right? got

But a -- can at gem, right? are they City CapEx Union that that be design to even kept we're assembled vehicles, end. And towards a minimalize SureFly. to automation try so so with also City we've in keep is packs, make. our possible, little the not made additional Union City. That's is of at in we the really adding to that, happy to as City that's that battery mean we Union minimum. going our as don't the which only vehicles I every that headquarters, vehicle to thing facility our we assemble here the we're Union lot And The CapEx Cincinnati, trivial, key intend is which new

Paul Largo

N-GEN So out when City, year the the Union and out any being other look of what we for would estimate product? might E-GENs and percentage versus be completed -- next products units you

Stephen Burns

as one be I 'XX initial as volume initial, will vehicle our the prediction. W-XX production N-GEN think again, until the in late year, the when number just is and it'll starts, far in be our

Paul Largo

confirming How Great. of to when And they your maybe coming being help bakeries, that increase with by Less? your numbers review you and their up proposition think last customers, get to value new meet data do they you customer's crunching data efficiencies of so the of in supporting Alpha much are? confirmed more they potentially up even your are your efficient? just Are to when are analytics orders. efficiencies the a regarding where selling orders, question back and

Stephen Burns

we hoped. than better actually Yes, had

have two We we follow. metrics

Metron our customer in data feeds telematics, vehicles. in-house every the us Telematics, on our the telematics, it's Our XX which developed and truck. That every is seconds

Camry, large quite have is XX,XXX-pound instantaneous. And -- fuel that's these better So economy right, that a Toyota than remarkable. getting we vehicles

not will of another think of things I comes own from have part their maintenance never they'll them build it, stopping we've day, kind mass And readily. fool naturally. and savings right? XX We going, they I our the that's told And that very, likely so brakes that our true a transmission, savings, that transmission are during time vehicles. true. like Mass can't You entire told The they customers mass, coming change moving additional our in prove don't the percent that XXX% miles we've right? you and think, is very

of All are lot as are up, so of and the is performing chassis The Navistar great they're pedigree, BMW chassis, our from rock engines solid. that rock-solid. engines required. a existing E-GEN those gas they're are Those holding

have vehicle XX it it's that where where -- again, think, aside, we XXX will time. believe kind built we systems But that had say directionally, a of that right we Teething I years, hoped XXX fair trucks So have keeps we number. over is the save, years, not maintenance, to if believe in life we years, a conservative $XXX,XXX prove them sorry, better. to trucks problems over large somebody that's and of I'm -- our we it these believe truck, will save or

Paul Largo

question. more one And

year year UPS, this it Regarding it think, XXX last was trucks. trucks, was XXX I

it press comes all whether wait or see a you we before new tendency until order allowing of to post order, order? N-GEN. completion bigger the release of Is think E-GEN the there them a guys in like the the from I the the current on to a form to

Stephen Burns

-- the on medium-duty right? don't that want has street larger increasing probably increasing and from is right, I that And ever in it up way. vehicles. Since know -- just perspective, ever position think, that we electric, kind other about we orders, have this I XXX UPS vehicles any this think vehicles will put us, we to again I it company delivery totals worldwide of running

bucket, size to now, like planet it put lead although seems new right? in we right the Although we just constantly ever a perspective, orders the orders, just of XXX the and need increasing want So in and size. of the We're world-leading, for drop leading we're anywhere and still aware. it is sure but that world any in in we've never United seen far a as as the announcement States, anything

packages delivered other kind edge. you of learnings thing those miles volume, the and that that from of how competitive kind volume, are leading of the keep out come that your comes from of it The number

that's the to with our worked of vehicle we ideal we for what the all N-GEN. So and you, say what's customers call now

we've can't and let's to E-GEN the that orders did and to we tiny do really it's -- although new test say to told back with don't want then. start we have So we them like

major order a on a we're these us you pressure, folks say are were When to they size. just to how order essentially somebody vehicles. pressure we a orders our say they're outside even putting they lot give That let's them going America, of the X,XXX we if change tens mean, that later. of them change. getting -- orphan because have, legacy I buy So test, of was vehicles for lot think -- to delivered and don't pressure of them. is customers in to a And I orders buy all in is anybody we thousands to have vehicles, an That once really, attainable. a start think say it's larger And an is X,XXX don't things

happy anybody And going And in are the that to enable So a is the it's on not very -- our of And trivial We're have front effort. N-GEN we feel to what miles result everybody. we've of the us again, with progress. road don't done. we're stay world-leading. like those experiences we in

N-GENs give give So don't too of predictions. new too industry ever we more give to we're we're the -- just than sold we've feel We we to financial anything. expecting small, sell predictions. don't But is

Paul Largo

much. very you Thank

Operator

to turn time management Q&A like floor gentlemen, closing to would available now for comments. the I this for the all is over we and Ladies have back today.

Stephen Burns

for listening, this make I'd that I'd hard for so us. to -- I'd following have just this like to happen. just our thank all of worked like thank is employees like to Steve, everyone

enables and us things do We have to above fight an great incredible group class. that weight our

want And workers. that on. see vision well do anything you early to with you to realized, Duane, thank sure starting Investors have that hung make say? I are so our it have I us as as investors to saw and the early want everybody,

Duane Hughes

I continuing covered out best of Steve. it, very we mute. Sorry, We're us, deliver excited to to I get about was as the think hard on ahead as product everybody can you No, opportunities there. the work

Stephen Burns

Okay, Danielle.

here. I think good we're

Operator

conference ladies gentlemen. our you, Thank conclude does today. This for Excellent. and

for your all you wonderful day. a Have Thank lines. your disconnect now participation. may You

Workhorse (WKHS) 12 Nov 172017 Q3 Earnings call transcript