WKHS - Earnings call transcript Q3 2018

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Operator

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

As a reminder, this conference call 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

and taking everyone. us the call. Jesse of for appreciate you for time good you, We afternoon each our Thank to join

the is are third a provide touch business on website. quarter website results forward-looking to Gaitan, attention release provision milestones call and brief September the turn overview, an XX, a Steve of from forward-looking a XX-Q few Before our that, of that In our to actual who identifies the before cause posted harbor ended over our we quarter. for content of operational to our safe walk will will both Investor update CFO, going our on Copies provide our may financial the as section documents moments, well the with the filed in on call highlights risk Form of Paul safe begin, part press for that results our results harbor and come and from of differ year-end The the we your XXXX. our opened, market and available our and issued QX statements. But to the as statements our to some factors CEO through update. quarter. I’m you want on our I line our is Burns for materially provision Relations After

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

Paul Gaitan

of today. This the for And from issued the all joining both and the us million more in now quarter in to which get morning, press the for with was third of decrease business of decrease quarter. as should XX-Q discuss a going The primarily $XX,XXX in meaningful from reported $X.X not filed our discussed you who year-over-year down volume the I interest Thanks, truck of results financial some shift in information due color believe quarter those of of release, which SEC, on detail Duane. today's same our XXXX. our or XXXX. results recommend sales capacity thank as quarter. representation our to well for of we which potential materials our was And the being considered We period form the in be current Sales our the a the we comparison of operations through vehicles. are were as to to call.

diluted XXXX and of administrative issues. in to and loss a to volume compared in sold related in The the basic for XXXX or million general of from per $XXX,XXX. legal several or basic settled settlement also $X.X quarter the R&D primarily net couple third for significantly and $X.XX a reduce $XX.X Selling, of items. net per cost and Our trucks legal expenses quarter due expenses is Workhorse loss diluted improved million to totaled share Combined decrease nonrecurring quarter QX, improvement due rose $X.XX for share. to the spending. and

certain capital in to cost raise August. incurred we related Additionally, the

the the income the be statement. period contributed in the of granted which during in expense this loan may the fair a debt price. uptake Lastly purposes. as specifically, to the with increase represents of to significantly in to company's discount accounting the decreased of on and which balance have is offering interest the our July some of line expense interest change valuation Arosa the Arosa value year warrants with change and item of fair principal for traditional debt of value previously warrants debt Capital since our in line outstanding similarly in stock item accretion you More warrant period-over-period in the treated interest with Management has includes aware, we on items company’s decline which in issued both The connection Arosa the value quarterly line the the

orders plus As previous with in now $XX calls to we said on significant finance we capital order need million have a backlog for hand. these in

now. provide that processes pursuing state in regulation FD to am health support process able long-term I on brief of according the the those I a business. the current viability our an requirement types of and currently of ongoing to extent investment We’re to multiple will update

First partners future related space and secure and investors. as energy, institutional traditional such transportation as industry to goal well with foremost financing strategic to respect our in our as

our grow capital must we evolve accordingly. structure As

relates international equity for I equity were operations. it the the the securities of These to the payable previously future mortgage As net funds had proceeds paydown and aged $XX.X offering used provide accounts property, retire on offering mentioned, funds to Loveland million.

us, as as remainder outlook of over Workhorse behind the want the I XXXX. Steve? of of financial operational well our Burns, give quarter, with things call the some for to of turn Steve overview Now side the an discuss to CEO, to and highlights

Steve Burns

your Thank to get you, fairly everyone to again Paul. call. And so Today I'm right comments to welcome can brief going I keep questions. the to wanted my we

is recap update the here let’s the delivery all of start a main truck. quick electric activities. first First with N-GEN And

a familiar, truck. all-wheel-drive floor remake ultra-light an less you XX of to new out the is we It N-GEN where those The truck. or the local per set of gets next low gallon. generation For ground-up design N-GEN delivery equivalent truck miles is

a gets Think the of change. that ramifications kind of and gallon. typical capacity about a per cargo similar reference, about miles For truck X.X gasoline

Ohio at have are the and Francisco the over our our and with in delivered N-GEN after during it significant this really a R&D deal to I a delivery the QX testing. think team great N-GEN with In of packages prototypes, table truck in come we vehicles. park electric using out hit XXX,XXX San we really

manufacturing in commenced we version. Now have early production our

in of the are two. and first making next fully three process vehicles completed of We have the

In designed on goal also it delivery addition we most feel a engineering each a a profitable to truck best be the efficient and per from basis van, is with to we N-GEN what the standpoint. truck local producing

folks I think current make are struggling car into companies are vehicles aware that electric to are that them the profit. passenger making most

it is to is when margin to no profitable, system clear small I design, So basis. service want chain feet a profitable factory, a a to supply sink have vehicles. say material be operating I it on and in a all build

mentioned factory is the required a to as due parts advance few reconfigured of Although Financing to to only XX been the making are make lack earlier. up in currently that the by a vehicles proper financing has Paul we to day, vehicles builds. of

sort have such fair and calls on equitable efforts several discussed to we we we that find call, on and Workhorse. these As to this terms continuing a on our component partner are again financing, times financing for key and are our have

Finally one DHL. can now to is we’re of purchase excited order N-GEN for that trying batch of we and initial marquee that an new our is announce the customer DHL truck for engines.

base FedEx, mile the excited customer includes about likes incredibly delivery. the provides DHL in we change it and remain last and growing Our opportunity of game to UPS, the

Next our is SureFly.

find buyer ago we As us a retain help SureFly. an firm for few announced months we a investment to banking previously

in are our continuing efforts process. We this

a We given and flight buyer get in is to we the to that worldwide find that feel electric rate this be are appropriate confident SureFly race. will we to leader an able

While seek best we we buyer, a of full as development the continue certification. are the have pace on through looking for type progressing we rapid maintained and the procedures SureFly, FAA

aviation of begin mechanical military and joint software, aeronautical, of to stage team branch with of as talented the It’s discussions are advisers. well in U.S. note as team, electrical we testing pilot a and have to test that the We currently on relevant the the SureFly. also engineers late seasoned

details relationships permitted on as we provide will going are We that forward.

potential X,XXX W-XX major the pickup to truck. Workhorse represents largest stable with from the the Again electric on revenue our Moving vehicles. preorders W-XX within fleets,

have We ensure train line. portable this hard W-XX the chassis that worked product drive over much our and N-GEN of to

not secured and tool our Although the body design via panels the for concept we the proven trucks. are have already panels,

be and to to more our offer make an do fleets job to to to electric is their And truck. first OEM goal trucks. efficient continues the pickup Our be our goal able better U.S.

Lastly with the on with our USPS to-date, the continue restricted all has prototypes. contract, parties results pleased the Postal participating stated program. States USPS testing the of We're the are quite commenting that we for Service on in the but from the United as previously bid

coming So months. to on that's the We about look that. all progress we say our in updating forward about you

call now we're instructions. appropriate open can ready Operator, you if think the up for please to the provide I questions.

Operator

Riley. question Instructions] the [Operator Drisscol proceed of with line from Please coming B. Carter Our with your question. first is

Carson Sippel

have just questions. on Carter quick Sippel for I Carson is This a few Drisscol.

of expecting for phase trial what First comment and feedback can from of those you vehicles the them? on terms along to are lines process the hear XX you the in

Steve Burns

major had And course is This could it. drivers customer it the first on learn to as as to about we packages to delivering and or Steve trucks our say closer - inspect we're to early But up customers the production. customers two our and the closer XXX,XXX Thanksgiving. as to in refine We've product I that’s these in for and get so process much we lot we of see we talked up thanks a before asking a why questions. came could about delivering here

those wants UPS are fleets nothing soon a after. given and go they’ve a coming So major so and few ahead

Carson Sippel

are kind And half we optimistic XXXX? the ramp second of of getting the in about still going

Steve Burns

we we’re ready and build factory comes and its materials. If in earlier, financing recipe earlier far hope as

we hope contingent So on starts XXXX. financing it’s in early strictly but it

Carson Sippel

rating anything on specific you’re mentioned lines capital capital you’re or type lines? along those else On of looking options. the comment ratings you same Can pursuing vehicles you this at

Steve Burns

in that a to doing mostly there. he Yes, that is Duane I’m let involved going effort good job take

Duane Hughes

to as going his a to strategic potential write we have as Paul institutions. we on transportation in size number business, the the financial alluded and of with remarks numerous well conversations of As energy

as at parts we’re PO financing looking well options like the options equity supply us going. both debt allow investments, or financing as just to So type

engaged that more queue discussions, continue number today add So in of are to of a search we we strategic. even potential our to

Steve Burns

to think times discussed I parts. have like we one four it’s thing, I’d to note short many we important add as financing

Now cost few the towards truck of upside the producing trucks, dynamic. down for that the change we as are and to volume on of first we move years

tough at tough easier go - less is road was a it realized sense not turns material a that stuff is where but strategic profitable with given somebody scratch to we out basis. we it a could better and profit. while we help from engine that's something thought us are we it’s that ask they on there good - profitable feel a to chance of do getting much to finance is we this when much the I easier really started And - Here, build

sense So new think that effort. we I feel a optimism of towards

Carson Sippel

me vehicles? grow And planning how one of are XXXX half last then here, the the from ramp you second to UPS revenue of ahead

Steve Burns

well it’s you of Do with first now U.S. just - not UPS. all multiple of customers mean absence

So our we as non-dilutive. course, don’t a revenue selling of it SureFly know but in capital - risk I’m if revenues well you I count is be per add coming that to se, the is of going bulk the obviously

a is what part that big So of we happen. to expect

Duane Hughes

pipeline truck our rather is growing vans. nicely use the who sales with companies of a types say different I’d number delivery of up

have a to and already ability we fully to relationship beyond the well as on rider, XXXX from Workhorse. force above So sales the queue to XXXX deliver fill roughly with as we perspective our our units currently maximize expect

Operator

from coming Please Our of Cowen is proceed and next line Osborne question your Company. question. with the with Jeff

Jeffrey Osborne

what’s sort financing a of terms on there we CapEx the that what's you go? needed million for of way just Is capital, where about needed talked onion for the peel the that would money back working in could XX

Steve Burns

$XXXXX might small the factory of to or numbers top on vehicles depends the we development these spending in first say we’re they CapEx customer let’s I’ll that. take of production. like truck get we're But as this feel as all use the to conclusion for millions production many I dollars now as this There up need relatively essentially tens early according the reconfigured, CapEx, a hundreds that CapEx. volume. the an round is down could think times could something less a what Jeff. small the pop dramatically is of you shot to or gets been process has orders margin average and We in price now at R&D The round how on here, come if average let’s going. its be Parts, for more that some but and shooting for on surprises number in some again you. say is you of say the normally that CapEx,

truck certainly parts. per think $XX,XXX I that’s $XX,XXX on or

And over need and first. $XX give of we battery feel - biggest can for - kind will something batteries in we of the bigger commercial what are we cost from are of buy that is course parts can makers parts. so million backlog the those like So you vehicle we financed that get we

the most money it pay we whole to part somebody get thing So and conventional those the flywheel suppliers by OEM getting paid more be is and think We the vehicles don’t the a but the that need we advance. in make But part supplier. hope where for all can credit churn for vehicles the to end the from to we of building, XXXX of deliver we somebody we finance. going, the expensive is and vehicles, have trucks I that is here we’re start get those easier our

the generally part normally we the thing, that’s and feel the a aside egg get orders the it’s hard way but product. the and done in its we orders we and chicken have is So have the -

the have factory the we supply and have chain. We

So get done. to that endeavoring the financing and we’re is last piece

Jeffrey Osborne

is I the done? is funding something or to having thought body - the Steve that the parts part that panels you design reference of body about panel made mechanism

Steve Burns

my Well right. all paragraph to just there about am was the sorry, trucks previous delivery - I spoke I

Jeffrey Osborne

Okay.

Steve Burns

A the volume. largest pickup obviously truck the truck, pickup represents

of you pickup for worth truck is is delivery pretty imagine and also most contours We dramatically a truck have which expensive make. $XXX to the million the seat. bodywork different straight a the And but are than the pickup of it box and van preorders can

around regulatory tougher. the and is So the truck pickup

tooling It the out step was is done the tooling. first that body panels math which is for panels, that in I while vehicle been of all the that So big to concept of required we able all and not design the math on made have what made. the saying in was pull was trigger the a body it the we of

So the saw based on, that's and orders then that designers it. - are done improvement, accepted except and the what design and they

a it's made. the tooling just matter So of getting

Jeffrey Osborne

that about that on of assumption Just in it a work still W-XX, safe be we some is thinking that the that's shouldn't deliveries a more given to XXXX done any and probably there's for be XXXX?

Steve Burns

that No, in XXXX. trying we're really keep really, to

that the safety the and kind there's things. that's of The couple we're and components, we pickup very talked why although - truck, So of about new out of not aluminum. body, composites, even interior, elements inside carbons, steel and

make work eye that and W-XX that - chassis is But revolutionary. this the think is body chassis obviously, work different. engine, And train, our and the was So not drive train part can towards trying would train. convey the sauce all I really testing is, drive gone factory. has electric super keep an what we in in the in into the we We to there the our and is and drive that

of and at chassis part body going W-XX that's of only the are because secret the though the train the sell progressing to thing driver the financial constraints, thoughts the the even progressing. customers, so And is and not

Jeffrey Osborne

safe should assumption you capital And quarter than One, to You just over giving having mind. two deliveries alluded next two? safe that three constraints or a under don't if a trucks, development. we one just is Is working less about of think few assumption it the finished, XX more the how QX?

Duane Hughes

to XX it's probably parts. for money the If parts, we today had thing buy the day a the

this get will out quarter. So get many we to can as we to as afford yes, endeavor of

that - we currently have in limited can probably our and get parts with ordering here so own our - time. to capital parts have We for we

bet. be might XX a safe I think

Jeffrey Osborne

And the and question then just I idea structure SureFly is the of around the Arosa the investment. had last

of another March as terms any us eventually understanding of you of buyer variable on don't of find a that remind but be that If if into us you I you that can was price of SureFly just of in is to then my SureFly. and remind on same know there is the there'll mechanics investment of sort the if is, when that infusion believe can I just be A) sold is you're that that still there the capital the a Company are minimum contract does XXXX for of sort and understanding also unable so but interested arbitrarily expiration example, is self-destruct and to I'd that SureFly transaction speak? part

Steve Burns

with the retain just for had year. the SureFly, do them gave for to financing commit they remind and I'll Well, we all SureFly, cash to us, arrangement of Arosa banker so. to there And In deadline well, next the an is do do so. to a things. two We our to sell part folks - had A) investment the that

- for essentially that however point mandate we A) valuable SureFly wanted think the We came even that our So advantage anyway be sell company. it from the we just and that them. the and in - in of think to given from a space because private Company reap the that have not investors cash as really we flow a can happening maybe what's about view, a thought best that's to asset shareholders benefit we we B) of able

So get worldwide there's going we when have to a but there. and good path It's interest to people worldwide now to wanting say difficult when that into a to race. of in anyway again, lot happen it is formalized we're it's it we on it's a but get race, is and path that say definitively - race

confident done time. in it So we'll get we feel

Operator

is Brcic Securities. the question with National of Michael coming next line Our from

Michael Brcic

most have my questions of Actually answered. been

take truck? to it bit. build had So just little does the long a How N-GEN

Steve Burns

before I and suppliers that's as when the from actually delay our XX talking get we're in parts building - time from on parts far at - ramped about here. know To up a the you're if days day you the a minimum. we're order as they Well, planning build XX truck, parts don't

not minute So sure, or…? give I'm me per build

Michael Brcic

out trying you XX to on the is No, figure going them do I going days taking it we're it's to deliver XX of account take XX like depending whatever was just financing about say thoughts out to or or I more from the cars, XX course.

Steve Burns

them do get previous we're to what almost all Tier as you our Tier this, mention from you trucks, that But sufficient quality, - and can about you. trucks at else manufacturers. it's to can X times is trucks news better for parts they when shouldn't the a is we they time quickly the you to electrical the all to expensive really want small X,XXX X excited with parts, these their time good because order and are or give that from better compared XXX the count are vendors. I less usually components Yes, that. these building The product have delivery someone - they're on interesting And that well give is

in So more should field chain. the we have predictable better performance and supply

small have attraction the of of vendor that. really example, to and that quantity Tier selling us if is suppliers like Part So that be all parts our post lot that's arbitrary X us. for a is about excited win they'd a the we

X UPS upfront vendor the So, have the likes spark large orders confidence. from of Tier helped

this of we our So function and we a year even, - that's strictly can get financing. small do that's quantities XX like we when that say

Michael Brcic

a possibility with or egg and contract. that thing is The USPS chicken financing creates a thing, the

Steve Burns

The prime for not prime is the responsible we're there. all is subcontractor. We're different the that. USPS because

of not vehicle. Even which drive renewed chassis course the - we're - build that. for USPS that be a for no, we're So that the one subcontractor that issue us. the be of is train, But, bulk and will the from the won't step though

Michael Brcic

all take of will care financing and prime the assume any I activity?

Steve Burns

quite we we why have that's just warehouse And the are Yes. prime do not did not to candidly, this.

Michael Brcic

prime And or the you that? that now something use is

Steve Burns

it's have to VT a But with Hackney. Yes, called all they prime. body ware They're a be financial builder. a

Michael Brcic

of that for I relationship come that strictly so? with in and Do trucks these can they or some and financing on is help - engines you

Steve Burns

Could.

certainly would We it make with sense. that discussed haven't them but possible,

Michael Brcic

to want don't just the you muddy with point this waters USPS. at the But

Steve Burns

to out than as trying the trucks do yes, from trying really and but Well - the trucks at getting bring strategic this point the us electric while for there well financing. more financing USPS, of to find that the we're we're benefits

And so our that's there. goal

Michael Brcic

orders many do you like So, the N-GEN? how orders for have firm

Paul Gaitan

X,XXX X,XXX older me the N-GEN trucks and which is today E-GENs, on order - five let orders that, product. correct

Operator

a do proceed line Jeff question the We of Instructions] with Please [Operator have Cowen Osborne from question. Company. follow-up and with coming your

Jeff Osborne

chance UPS of on any fairly X for there in us a is the you or long DHL in a DHL? hoping or after terms looking be maybe either - how and small it's California going would similar on that starting scope more assume progression be in a of would constrained one a up I you you've test scale at give thought could Just and area to then helpful. to what XX That is? it's months that be, scope wherever any been pursuing sense process

Duane Hughes

started I start similar of not UPS we're road they have if here, and are the willing sees DHL to basis we you It's pilot first in of doing it in the to the on as small of doing. a been of today review miles to the have is that UPS scale-up their as what be think. we're have of terms vehicles handful would grow they to and others. will already vehicles relatively that equivalent the They confidence them performance level on accept Because expect we of when Steve and of have. I quite very already we done millions small as to say and they've vehicle, alluded quick what easily and with their proof-of-performance engine, a larger.

Operator

session. this concludes Company's At this you. the Thank time question-and-answer

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

Steve Burns

work and to Again, Thank listening like everyone this us hard everybody follows and I invests continue in us. to And will space. and you. thank that just would we conquer

Operator

quarter Workhorse joining for earnings Group's and thank Ladies third XXXX call. you us today gentlemen, conference for

disconnect. now may You

Workhorse (WKHS) 7 Nov 182018 Q3 Earnings call transcript