WKHS - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, greetings, and welcome to Workhorse Group's First Quarter 2018 Investor Conference Call.

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

Duane Hughes

filed on posted website. good as CEO, to then We call. join part we quarter release market some your and results documents will moments, with taking some few our of well the business, for of safe safe will After you identifies the who results before that statements. update will for Paul closed, an first and our Gaitan, press a touch of time us website March XX, in issued call Steve Form may Investor afternoon, you, XX-Q cause appreciate content recent a our our progress. of on everyone. ended materially XXXX. for the is begin, call statements highlights on to The operational to update. But both I our Thank forward-looking over our for Copies And year-end want Relations our In actual quarter the as Burns, a our brief differ turn the is our harbor we attention discuss from update provide provide forward-looking available Paul are harbor factors our the that section the financials. of our to our on to CFO, our and from our risk provision provision of

would turn Our call the the factors business. CFO, risk periodic our that, And our XXXX SEC provide Paul? like on Gaitan. the XX-K Form relating and detail to about to other I further filings over Paul with to file with

Paul Gaitan

Duane. you, Thank

for quarter QX, QX current of million also The our higher XXXX, we same recorded of on units from our in our capability. Sales for the statement. income with $X.X with indicated loss launching loss down down loss quarters an in first N-GEN the to our or from in per a quarter in shipped the fourth to W-XX $X.XX third the backlog. drop This last and XXX more focused at also demonstrated and million QX and XXXX period XXXX improved basic our $XXX,XXX, first gross profit. ongoing of share are growing operations upon where call, we in a and $X.X X to XXXX to in platforms of and $X.XX In our basic emphasis improve we and volume This share. XXXX, performance As net million or $X.X preparation production the we another diluted compared due diluted was XXXX. record was primarily favorable from is per of were

a Now minute take address before I the over to to like XXXX to a items. I'd turn Steve, call few

may accrued by from over the the the during encountered that accrued been which restated. issues that have rate applying period. improper higher actually had XXXX First, our reported made X-K that in be today, have seen consolidated the Form X We year statements as and we filed financial should found you we they determination recently full XX, an $XXX,XXX, vehicles effective the sheet of to and on sold liabilities allowance December caused consolidated the balance was number XXXX, account that was by of

just the issues the X-K beyond believe these XX-K/A We not caused occur In did that additional now we on our recognized have of items SEC that controls we with We in balance filing, to assure further have to there again. filed Coinciding discussed. not shipment will not our have addition, an properly overstated. had to with those any those reflecting corrections. was that internal be inventory in-transit place expense the reason and sheet are

of led Executive company as intended end well will Budde, and was stakeholders. also by us average additional price This Workhorse recently Burns; elaborate insiders, to financing private an company's as At company. pursuit and also existing by to April, our of we our at confidence is tremendous of placement stock gross Gerald million. the the of of closing we I for Director, private strengthen the shares balance which agreement, capital XXX,XXX common including H. investors Officer Steve continue of allow briefly Samuels a the objectives. of placement of Chief announced and announced vote the Directors are Benjamin $X.XX sheet near-term This who is Workhorse Second, the proceeds on The a $X.XX here. of to

For respective placement of which with reference additional the have filed been all private the restatement information agreement, their please and regarding Form X-Ks, SEC.

it Now Steve. to turn over Steve? I'll

Stephen Burns

more to who good today. press everyone our the joining a we afternoon, well Thanks, Paul, as the of with our I This materials be in information we'll as is call of filed get XX-Q the discuss results release detail on us recommend color which afternoon discussing some and on the those of to both operations Form SEC, issued today. going through the from quarter.

deliveries if made first-ever with FAA production. is SureFly, vertical broken before daily our routes believe not HorseFly on is currently. that first has the electric America's provide most few happening a made I'll the doubt I also chassis substantial the XXXX And are This pickup of Francisco it a and the the with progress priorities. towards It designed decision week It in the basis vehicle call as that's operating to costs into drone real-world perhaps pickup landing some last afternoon's more, I even this highlights plan with to Workhorse purpose And world San without delivery next-generation the move to N-GEN Workhorse first, innovative provides shift is is The electric take-off discuss the And of about this with technologies. of platform that I a some our The The also we days with reduced achievements has Bay experimental-approved us over area. scalability begins aircraft change N-GEN truck. commentary and quarter. questions. about the will a and through truly various evolution since electric been not outlook provide will used our brief For in N-GEN we our for on We on the beyond. now real-world W-XX turn X works. aircraft that approach the here way mention Americas truck. flown on last and W-XX be van two segments. executing to months transition is a to enough, and down call, weeks as first a key quarter pilot. ago, the including the production evolution operational towards has clear the for high-volume Workhorse, undeniable our clear

and We come have we N-GEN of from that the manufacturing demand. expect our W-XX process begun assembly the in adopting will large-scale customer the operation for the preparation

forecasted due sales prior our the As to our the this to this continued year. compared part, focus production. call, we in down on is prior In quarter were to transition large-volume

important our and purchase meantime, day, upfront, per it's time units begin impacts note parts we've certain our In assembly to operations, we and a of produce to quarter, nearly have achieve capacity material increased production At goal projections Additionally, enabling the rates. per can day, also X,XXX day production to margin to of production which the we're to us line. heading ability threshold. per to line units sales we our XX before our we positive XX the per units gross XX-unit have

We're future also projections. capacity ample to as meet We needed seeing add also and sales our to space expand. have customer funnel our

of first of deployed. of begins in you As with their tens up publicly UPS XX the to know, could the vehicles fleet. engine N-GEN our contract units stated replace X,XXX to with UPS that has thousands be

in high-level municipalities are many first and in fleets, promising some aircraft our the beginning going overview vehicles I'm now of related and and from as van N-GEN to electric various communications, parcel last-mile commentary total. segments, other our telecommunications, shift we as with With delivery, vehicle engaged utilities UPS, grocery Beyond to provide multiple W-XX. also representing that fleets, gears delivery with well discussions finished, thousands include business which delivery and

ago, and For vehicle. next-generation delivery the mentioned the I is N-GEN W-XX, a moment N-GEN electric the our as

the production-ready we in area been on vehicle. with vehicle N-GEN delivering Bay larger scale, N-GENs on traveling on month currently miles factory on to a W-XXs routes. production closing N-GEN our continue X San vehicle in our route. initial our of scheduled XX and we on adopting average we're deploy are Within has This first XXX to can a Francisco about and While in weeks, assemble our it their such that of daily deliveries day packages second round-trip work XX real-world

on had In the performing E-series X since I further real-world demonstrate route have to learnings These for-purpose over deliveries us those continue our only delivery but November project enhancements We XX,XXX that on and routes. we've scope, deliveries to delivered not our further us also proof an the Cincinnati in performance. same learn, unmatched vehicle. had we've vehicles believe in enable help customers and confidence of live real-life area also XXXX. technology build design packages give identify Workhorse

world's significant orders worth turning of contract. XXX,XXX the market N-series it alone preorders the interest of across should All W-XX X the With the is in Workhorse. space. the market orders electric nearly in to in clear year platform. is step Combined addition delivery in corner intent cargo to million We existing XX,XXX-unit segment for operational vehicles the total commercial N-series directly delivery from delivery strategy evaluating the changed This terms truck. in pickup fleets and our place mention cargo putting interest an now told, of we U.S. SureFly. of deploy some per of electric and a for from year largest represent In automotive are van van than to segment vehicle, to current to have from has N-GEN W-XX the commercial to $XXX us of the and electrification the sold van for ownership fleets interest, the for million N-GEN, their vehicle UPS in fleets and the idea From market fleets. each U.S. with fastest-growing cost opportunities that the also the more the and new letters and

The is on take-off human test excited of uploaded footage believe board the since States flying significant flight and incredibly week an a flight I'm with This nearly of FAA. the and approval experimental our SureFly first website. video to such see can in United discuss the the has FAA. vertical flew achievement, but a landing pilot flying, in been the hovered approval. aircraft from untethered you the manned, has electric presence YouTube, the only we this that now is a successfully through SureFly. FAA Let's which We not ago, that

late for achieve field. full should FAA, early target aid on still new which are exciting in XXXX, XXXX first-mover we from forward, the Moving our type advantage certification to this

own with and the right. this our its our Inc. this be future the we in its incredible space, of that, and this intention the public SureFly, into delivers, remarkable entity, Upon to is focus amount on of year-end. Beyond and of shareholders Inc., wings. that, it's of by we spread is very spin-off still provide technology landing of own hopefully SureFly, on publicly-traded separate said its achievement that vertical portion achievement SureFly the Having would shareholders given of to it pure-play a the the potential spin-off, take-off best which interest opportunity first the company business resources feel and

the to HorseFly. Moving on

to is We data event more. growing may the the but our much significant believe that HorseFly. and process system, recorded I last-mile by in delivery customers approval, for customers, savings flying. and launch delivery perhaps are the performing believe the system delivery more Workhorse's monitoring operations. probably system FAA in our can building which Ares first being electric look data space have the our making HorseFly sound software importantly, opt-in -- are as segment. All for as and as gathering delivery the drone mentioned is the drone USPS, into functionality, are are since delivery, specifically is demonstrating an excited potential drive comment and by the last-mile and package delivery our this about we FAA that has patented trucks as SureFly delivery now brief just This gained they a knowledge delivery significant critical the we we HorseFly delivery via with on invention the success daily and tracked their it's patented truck. And innovation using and last-mile integrate provides we electric to earlier a delivery major drone/truck cost of truck the use USPS progress. in HorseFly that drone understated, just We in truck/drone technology. made drone deliveries reality, progress deliveries

that for sources are everyone evaluation the extent, can again capabilities. continue happy as still as capital structure time, $X strategy, under billion be with capital billion, awaiting know program to significant stages. grow, ability $X need this say to report limit XXX,XXX our evolve You And continues to rules funding as I'd while just to our it we eagerly to we opportunity. we and people it to continue no remind in replacement we the as And vehicle news process progress relates multiple pursuing that at we discuss testing that ground decision-making are with have durability specific tested. we our To detail. we to the are to vehicles are that any today, recognize well. the like Financial the through our

We side, nearly a the those our more Altogether, On our road. with leading comprehensive and vehicle and partners routes on financing OEM. debt have our Collectively, as XX seconds every vehicles while positioned the growth. to robust U.S. X being includes Outlook. electric data we portfolio the parallel, options to logged both servers provide Workhorse growth. combination support has believe facility along equity traditional our points support this miles equity road establish they're signaled platform million of investors. a to the strategic will to are debt our exploring institutional In commercial

for Tier on ready to up our have defined through forward And we're X path We network, open throughout continue our and systematic with and updating to scale progress to we call questions. supplier expand We now and now that, controllable XXXX. the volume look you your production.

Operator

Cowen question. question and Your state with Please from comes Company. [Operator Instructions] first Thomas Boyes your

Thomas Boyes

that the over getting the Couple of quick done expense been several of operating the know should I How of and then better think set. will the for kind for items, on rate ones me. and getting company of, think you what, the next it's for legal over we do run because just just R&D spin-off those quarters? expense the be couple about higher SureFly's quarters? side, a the prototyping Absent the next

Stephen Burns

one? want to you that Paul, take

Paul Gaitan

have the realize we too to our at and get SG&A sure And the same to we funds the make -- flex with far behind don't try available. We curve. time, R&D that we

the SG&A year about become a a And for instance, we've ago. all vehicle So implemented we've modules. that's on some inventory for we time, operations that and and robust of the regulatory the more as We issues. for our a us to complex. in little are SG&A coming all same side, staffing of added more our things in modules going to a we're meeting purchasing good At then, over the if support came platform manufacturing spoke going our have area key grow are to the us larger, states and up delivery for finance That XX and compliance make little our and more online. ERP absolutely since

that So a all those need a to up talking larger units the we're year. are thousands at, company, units, have where of we're really and of hundreds you to targeting set be where things

Thomas Boyes

discussing the W-XX just things is One of other the too, pickup truck.

bill or really really that that reduction? the of you just is the margin positive is volume that could gross as as that for you have anything Or component improvements materials on margin far for getting gross stance vehicle, made at completely as Looking there to identify scale? headroom it breakeven biggest there cost

Stephen Burns

X build effort gross XX given decision at miles part of product a kind in a with, best coupled not cost time. -- was the a end, have positive. margin gross we've then some conscious gross which us the dual could, for made and So to we that the in got of -- volume, Engineering, got XXX learnings why all the done. just the margin to it down, is orders And you've the we million from

can't there. you get Just

engineering on very up. they with to -- we're product. is volume to believe to have to tool too, combination - of They the proud chain And to in the have for going And have you're a it's So critical. work supply the both effort. supplier order them you

orchestrated an It's that's it's dance, dance. So a but tough that's, the part. exciting most

-- all this, your are things to that's that to have up on focused chain, your are volume. on We we have supply the into your getting clarity assembly plant, and that engineering, teed all your go singularly regulatory,

Thomas Boyes

one last one me. for just then And

kind wild list that for you mark? of, pickup is what of being kind the gating in that be to truck? the to Francisco, are out that the factors that Given of in see punch in San N-GEN the order taking now same The need hit used, down really things

Stephen Burns

Yes, first, platform people the underneath, a a lot. goes only vehicle pickup what more that truck same the with around X-passenger all because the complicated expect reason it's regulatory that. the modern-day out vehicle it's the N-GEN came a is is a pickup although they're from And

So and tumble. very, rough very

a we part, - engine. is have it's the more delivery other than for is all-electric range which N-GEN, most for only the or pickup range-extended In defined truck, folks, hybrid and the So the popular it thing extender. engine the geared the routes the comes because as

So having lot two gasoline board. regulatory a underneath, really have kicks in complicated, it's the on just when you more powertrains and

and that the -- the upfront. same way of, motors, the have you So of chassis, having the same -- that's do same approach. same electric staggered the the of the, leverages is the the those brakes, consciously lot columns, same you kind a same reason But underpinnings, for dream to are steering

started office effort way that we design. when the post started we So upfront

Operator

FBR. Driscoll question. Please question your next comes Our Instructions] from state [Operator with Carter

Carson Sippel

I you explored will Carter And on Driscoll. fuel role is or X cells and a if opportunities hydrogen development And Carson wondering, play Sippel have This any was do for vehicles? Class partnerships in think you so, here? X

Stephen Burns

stab Carson, this take that. is I'll at a Steve.

We it market the, product But out, with but these on using hand we of do with we down before play going infrastructure is got are to not people that. new on we had -- the that coming pickup -- cell could partner's in hydrogen, and profitable. infrastructure innovation fuel meters fueling a we of FedEx. of, so there's lot really we're until on the think we do a certainly, But we semis market. the truck We might to it. in to meter and highway, a truck a viable kind electric a can there. top wait get all route delivery, to that, get dial on And do hydrogen the them for We're have be threatening package there, a it's but with

in So battery We cell to hydrogen thing. an Essentially be there. is pack. viable a mechanism the it charging vehicle. Hydrogen electric hand have a could really a as basically acts our fuel wanted for vehicle a

on we the everything and vehicle, is electric what underlying have. So that's

we for just prediction in it don't switching extender XX But has range be or game that years. for in to wanted ready and happens. to just a case we a ebbed when to to happens. fleets ability that, we want if to generator some -- is want We be one, hydrogen the now have internal do So it go. hydrogen direction combustion to want the of sure flowed make We

Operator

with [Mike state from Maxim Group. comes Please question Silivan] your next Our question. Instructions] [Operator

Unidentified Analyst

have that drone do drone forward? going delivery, from Steve, quarter? we the patent in How included monetizing numbers the on making ramp is them -- delivery the The side we're and we the Or a for from side seeing, those monetize other are far from we revenues package package we're question. know the that deliveries. a as are we see the delivery, truck. I do hopefully question of planning the a And business? as the

Stephen Burns

the far truck, expanding fairly it's package Francisco - one next delivery week. the from know it's San as only effort, revenue to the don't from small, I course, of two as

Paul? know So I breaking Are don't out you, that is separately. if Paul

Paul Gaitan

in It's number. our No. revenue immaterial

Stephen Burns

But again, of a car, $X.XX package package On the lot It it's on a particular it supplement delivery. driver to package Mike, side, great a a on drone drone a eliminates a cost mile top a electricity. uses it, truck question. of

or driver expensive, almost see. from what but coupled really with with a Having two -- close these nth just like right? We're to not anything the So that. been FAA flying or likes less we it's that. first a to is it's within fleet, of the doing be it's by X the again, XXX a I mile degree these almost, to That's it's combination has wheels door. why mean, But phenomenally think warehouse got we're going truck. still a change. And electrifying to But meaningful to truck over years door the perfect bring refined a which

United delivery -- shot represents I mechanisms are States, with people to delivery vehicles segments. one going the And company delivery a aware, delivery as say drone drone protectively and one of patent you're think everybody's only in And we not on truck to electric the it's course, the So of long is package and only Last-mile the of. speaking and that's only fastest-growing that also find a right? and increase, the package top. ourselves

last-mile wait the happens. is really The market huge for well of positioned. we And how to we have are middle for to think this disruption don't right come. think we of market And So positioned well we just we're the it. delivery in

Operator

the question-and-answer this session. At this concludes time, company's

you to team the Investor taken, I'd call Workhorse's closing Mr. may to contact turn his If not Burns for your question now WKHS@liolios.com. was over at like remarks. Relations back

Stephen Burns

everyone that us, and supports again we're Just future. follows like about and excited us to the thank

Operator

day. great This concludes Have may conference All Thank call. parties disconnect. you. today's a

Workhorse (WKHS) 13 May 182018 Q1 Earnings call transcript