Earnings call transcript: Workhorse Group Q4 2024 highlights cost-cutting and challenges

Published 31/03/2025, 15:50
 Earnings call transcript: Workhorse Group Q4 2024 highlights cost-cutting and challenges

Workhorse Group Inc. (WKHS) reported its full-year 2024 financial results, highlighting a significant drop in sales but an improved net loss compared to the previous year. The company’s stock experienced a slight decline, reflecting investor concerns over ongoing challenges in the commercial electric vehicle (EV) market. According to InvestingPro data, the company’s financial health score stands at a concerning 1.42 (WEAK), with particularly low scores in profit and price momentum metrics.

Key Takeaways

  • Workhorse’s 2024 sales fell to $6.6 million from $13.1 million in 2023.
  • The company reported a net loss of $101.8 million, an improvement from $123.9 million in 2023.
  • Significant cost-cutting measures were implemented, including staff reductions and leadership pay cuts.
  • Workhorse is focusing on expanding its financial runway and securing more commercial EV orders.
  • The stock price decreased by 2.07%, closing at $1.94.

Company Performance

Workhorse Group’s performance in 2024 was marked by a decrease in sales, attributed to slower-than-expected adoption of commercial EVs and regulatory challenges. Despite these hurdles, the company managed to reduce its net loss, thanks to aggressive cost-cutting measures. The company’s beta of 2.79 indicates significantly higher volatility than the broader market, while its price-to-book ratio of 0.14 suggests the stock may be undervalued relative to its assets. Discover more detailed valuation metrics and 20+ additional ProTips with InvestingPro. Workhorse remains a key player in the North American market for commercial step vans, maintaining a competitive edge with its full market coverage in the Class IV-VI segment.

Financial Highlights

  • Revenue: $6.6 million, down from $13.1 million in 2023.
  • Net Loss: $101.8 million, improved from $123.9 million in 2023.
  • Cash and Cash Equivalents: $4.6 million.
  • Total Working Capital: $8.2 million.
  • Inventory: $41.8 million.

Outlook & Guidance

Workhorse is concentrating on extending its financial runway and advancing its product roadmap. The company plans to secure national fleet and government procurement contracts but has refrained from providing specific revenue guidance due to market uncertainties. Upcoming product launches include a reduced range 140kW W56 model set for Q3 production.

Executive Commentary

Rick Dowd, CEO of Workhorse Group, emphasized the company’s resilience amid external challenges: "Workhorse simply designs and makes great commercial work trucks. They just had to be commercial electric vehicle work trucks." He highlighted ongoing discussions with major national accounts and government entities aiming to achieve net zero goals.

Risks and Challenges

  • Market Adoption: Slower-than-expected commercial EV adoption could impact future sales.
  • Regulatory Delays: Pauses in regulatory approvals and fleet investments pose significant hurdles.
  • Infrastructure: Inadequate charging infrastructure remains a barrier to widespread EV adoption.
  • Political Uncertainty: Shifting incentives and political changes create an unpredictable business environment.
  • Financial Constraints: Limited cash reserves and working capital could affect operational flexibility.

Workhorse Group’s latest earnings call underscores the company’s strategic focus on cost management and product innovation to navigate a challenging market landscape.

Full transcript - Workhorse Group Inc (WKHS) Q4 2024:

Rob, Conference Moderator: Greetings. Welcome to Workhorse Group’s Fourth Quarter and Full Year twenty twenty four Earnings Call. At this time, all participants will be in listen only mode. A question and answer session will follow today’s formal presentation. As a reminder, this conference is being recorded.

At this time, I will now turn the conference over to Stan March. Mr. March, you may begin.

Stan March, Executive/Investor Relations, Workhorse Group: Thank you, Rob. Good morning. We’d like to welcome all of you to Workhorse’s twenty twenty four results call. Before we begin, I’d like to note that we posted our results for the year ended 12/31/2024 via press release, as well as filed our twenty twenty four ten ks with the SEC this morning. You can find both of these documents and an accompanying presentation that will form the basis of today’s conversation on this call in the Investor Relations section of our website.

We’ll be tracking along with the presentation during the call. Joining me on the call today are Rick Dowd, our CEO and Bob Gannan, our CFO. For today’s agenda, please turn to Slide three. Following my opening remarks, I will hand it over to Rick, who will give you an update on our strategic and operational priorities throughout 2024. And Bob will then walk us through the financial results before discussing our continued actions to preserve cash and extend our financial runway.

Then Rick will wrap us up before we open the call to questions. Our disclaimer can be found on Slide four. Some of the comments that will be made today are forward looking and are subject to certain provisions and are also subject to risks and uncertainties. You can find the full disclaimer in our 10 K, which again was filed this morning, as well as in today’s press release. I’ll now turn the call over to Rick Dowd.

Rick?

Rick Dowd, CEO, Workhorse Group: Thanks, Stan, and good morning, everyone. Thank you all for taking the time to join us today to discuss our 2024 results. Let’s jump right into Slide five. As we navigated 2024 and moved into 2025, it’s clear that the landscape and pace of adoption for commercial EVs continues to shift. Recent regulatory pauses like the state of California withdrawing its waiver request to the EPA and a temporary freeze on federal fleet procurement have created tremendous uncertainty in the marketplace.

Several fleets have paused or delayed their EV investment plans. Fortunately, a few have not, and several states continue to move forward with their plans to electrify their state funded fleets. Here at Workforce, we did not build our business model around political cycles. We built it on designing, building and selling great trucks with great people and with great business partners. What remains constant is that our vehicles, especially the W56 family of products are proving their value in real world operations in the last mile delivery space.

Beyond the numbers, drivers and owners are noticing the difference. The W56 offers smooth ride and acceleration, quiet handling and much better visibility. Factors that improve safety and reduce driver fatigue, while also lowering operating costs. In the fourth quarter, based on direct customer feedback after multiple fleet demos, we launched the new W56 two zero eight inches wheelbase truck in both strip chassis and step band variance as a longer wheelbase version of initial W56. We have seen positive customer response to this new vehicle and have already received a purchase order for 13 of the two eighty ish wheelbase step vans, which we expect to begin delivering in the second quarter of this year.

We also received approval for the sale of our W750 and W56 step band models in Canada last month, which is an important market that was not previously open to us with these step vans. We are scheduled to start demos of both vehicles with a large national fleet in Canada up in April and May. While we worked hard to sell more trucks, we have also worked to reduce our operating costs in order to extend our operating runway as a start up EV company. We made significant reductions in headcount and other spending activities across the board in 2024. These reductions were tough, but they were necessary.

People, process, product and partners have been the guiding principles of our mission from the start of our leadership tenure here at Workhorse. We’ve achieved a lot of what we set out to accomplish through rigorous process discipline and product innovation. But I want to take a moment to talk about our people. Our team is a driving force behind everything we’ve accomplished that you see on this slide and their dedication and at times sacrifice have been nothing short of extraordinary. When challenges arose, our leadership team led by example by taking pay cuts or deferrals.

Over the past year, every member of our workforce has stepped up taking on increased workloads, foregoing pay raises and reduced benefits including the suspension of four zero one contributions and endured both an extended furlough and a 60% reduction in staffing, all with the shared goal of conserving every dollar to secure our future. Our entire team is fully dedicated to our long term success, even in the face of the uncertain and turbulent commercial EV market additions we face today. Despite these challenges and EV market segment realities, our workforce attrition has been remarkably low. Rather than run for the exit, our team has leaned in working harder than ever, finding ways to innovate, increase efficiency, reduce costs and deliver exceptional products with fewer resources. This is a team that believes wholeheartedly in our vision, in our products and our ability to succeed.

Together, we are weathering the storm more united and more focused and poised to continue driving the company forward. We stay focused on what is in our control and to do our best to adapt to those market factors like changing government mandates, tariffs and customer EV purchasing plans that are outside of our control. You have heard me speak in the past about our financing arrangement with ATW, which provides us important support to execute on our product roadmap and manufacturing operations. ATW has been an excellent financial partner for us. We continue to look for effective and efficient ways to finance the company going forward.

With minimal debt, over $40,000,000 of inventory and a 420,000 square foot plant that we own, which sits on over 100 acres of land, we still have financial leverage to help us extend our runway here at Workhorse. Moving to Slide six, let me take a moment to discuss our continued product development work. Over the past three years, we made moves to establish Workhorse as a leader in the medium duty EV space, something many others in this industry can’t claim. While others have stumbled in or failed, we have stayed focused and executed on our strategy. We have built in house manufacturing capabilities to produce complete step vans, making us the only North American based OEM capable of doing so.

Every other EV chassis supplier is 100% reliant on Morgan Olson and Utila Master for the installation of cabs and bodies based on fifty plus year old designs. We have achieved full market coverage in the Class IV to VI commercial step band segment. We’ve met both FMBSS and CMBSS certification requirements and successfully tested our vehicles both on the test track and in engineering labs and most importantly in the real world with last mile fleets across the country and at our own FedEx ground routes here in the Greater Cincinnati area. We’ve established the processes and systems to support long term business growth, including a national dealer network, a capable service and parts supply network with trained service technicians and a customer support infrastructure. We have qualified for major state and federal incentive programs including California’s important HVIP and ISF certification programs.

We have been awarded both federal and state government procurement contracts including source well on GSA. We’ve achieved approval to import vehicles into Canada. We will start those new product demos in April and May. And we’ve completed successful demos with extremely positive feedback from several fleet operators. We have successfully passed every single customer demo that we’ve done over the past two years across the country.

And we are continuing to push forward. Our W5628 wheelbase model recently received full regulatory approval, met all FMVSS and CMVSS certification requirements and successfully completed 250,000 highway equivalent miles in the durability testing. As I said earlier, we’ve already secured fleet orders for this model, which are scheduled to ship in April and May, proving that it’s a viable, no compromise commercial vehicle solution that fleet customers want. In addition, we’re working on a reduced range 140 kilowatt W56, which remains on track for Q3 start of product regular production. Again, this development was initiated specifically at the request of one of the largest last mile fleets in North America, who was seeking a lower cost step van with a 100 mile range versus 150 mile range.

Across our product lineup, we now work with more than 30 certified upfit and body partners across the country to provide fleet ready configurations with unlimited options. Our recent awards from the City Of Tacoma, Washington through SourceWell are an example of the importance of these upfitter partnerships. One of our dealers in California also recently was awarded DGS contracts to sell both the W4CC and W5-six vehicles to government funded fleets in the state of California. We are confident our people, our products, our supplier and dealer partners, our engineering capabilities, our manufacturing processes and our service and updating networks position us well to take advantage of near term and long term opportunities when fleets choose to start their transition to EVs. Moving to Slide seven, let me talk a bit more about our W56 step van and its proven performance in the field.

Let me start by saying that Workhorse simply designs and makes great commercial work trucks. They just had to be commercial electric vehicle work trucks. The W56 was designed for the demands of last mile delivery fleets. With a range of 150 plus miles, a cargo capacity of up to 1,200 cubic feet and expected fifteen to twenty year estimated operating life based on durability testing results, it’s engineered for the job. Fleet operators are seeing tangible savings, averaging 27 to 31 miles per gallon equivalent compared to just six to seven for typical ICE vehicles.

Even in states without incentives, EV operating costs are still 22% lower than equivalent gasoline or diesel fuel powered trucks. When you factor in reduced maintenance and lower energy costs, the total cost of ownership delivers a payback of in just four to five years without relying on any government subsidies. One of the strongest validation of our product comes from our work with FedEx and its independent FedEx Ground service providers. In 2024, we successfully demoed the W56 with Federal Express in Memphis and with FedEx Ground and signed a three year master framework agreement with FedEx and we delivered our first fifteen trucks last year. We expect an RFQ mid year for twenty twenty five orders and we’re seeing increased demand from FedEx Ground Operations across The U.

S. Take for example a FedEx ground contractor in the San Francisco Bay Area, who purchased a W56 last year. After more than six months in service, he told us and I quote, The W56 is the best EV step bandwidth driven. Nothing else comes close. That same sentiment is echoed by FedEx contractors in California, Minnesota and Pennsylvania who are adding W56 to their fleets.

When we recently visited FedEx terminals in the Bay Area, we saw rows of competitor EV steps sitting idle, waiting on spare parts, waiting on service or waiting on answers. Some even had failed brakes. Workhorse customers don’t have that problem. Our well designed and well built trucks combined with a superior dealer support and service network is setting us apart from other start up EV OEMs and even some of the traditional automotive trucks OEMs in the commercial EV market. One of the most telling examples of W56 performance happened just a few weeks ago.

A potential customer in California had concerns about whether our vehicles could reliably handle their long delivery routes, which could be up to 150 miles long. So we put it to the test. A driver picked up the W56 from our dealer in Southern California and drove it 165 miles to the customer’s location. This was all highway driving, 55 to 60 miles an hour through steep mountainous terrain. When they arrived, the truck had 12% state of charge remaining.

The entire trip was logged via Geotab telematics recording 40.21 miles per gallon equivalent and used just 76% of the battery’s charge. This was an unloaded vehicle, but the distance, highway speeds and elevation changes made it a true test of capability and the W56 delivered exceeding the stated range of 150 plus miles. In another tough test, we conducted a multi quarter demo with a large industrial supplies and linen company. The W56 handled a 45 mile daily route, carrying between 5,000 to 8,000 pounds of payload every day for more than six months with only one downtime incident that was addressed by our engineering and service teams overnight. These real world demonstrations continue to validate the strength and capability of our W56 product family.

As previously stated, from a product production and operating system standpoint, we have succeeded as much of what we set out to do. What we can’t control is the market’s readiness to buy commercial EV step bands at scale. We are currently at the table with Fortune 500 national accounts, government entities and last mile delivery fleets that have aggressive net zero goals. Publicly, they remain committed to electrification and meeting strict greenhouse gas emission standards. They need reliable, durable and capable commercial vehicles that deliver real world performance without operational trade offs.

That’s exactly what Workhorse and specifically our W56 provides, a no compromise zero tail pipe emission solution that is built to work. As Scott Davidson, CEO of Rival put it Workhorse has proven to be a standout partner in the transition to electric vehicles. We’re excited to continue bringing workforce vehicles into our ecosystem and helping more fleets operate efficiently and deploy next generation technology. Turning to Slide eight, throughout 2024, we continue to electrify our own fleet of vehicles being used in our Stabilized Workhorse initiative. We now have 13 electric vehicles in our fleet, including both W750 and W56 step band models, And we delivered 154,000 packages to FedEx customers during the 2024 peak holiday season.

Our electric fleet at Stables provides first hand data on the benefits and challenges of independent fleet operators experiences while executing last mile delivery operations. It also provides important insights into how fleet customers can plan for and manage their own transition to EV operations. In the real world data backs up that enthusiasm. During the peak holiday season in December, W56 is in service with contractors in Northern And Southern California, Minnesota and our own operations in Ohio consistently achieved uptime of 93% to 97% on a daily basis. That’s a critical differentiator versus competitor EV products and even with older ICE commercial products.

The bottom line is that our trucks work. With that, I’ll turn the call over to Bob to discuss our financial results.

Bob Gannan, CFO, Workhorse Group: Thanks, Rick. Let’s turn to Slide nine to cover our full year results. As a reminder, the twelvethirty onetwenty four financial statements have been adjusted for the March ’51 to 12/2005 reverse stock split. Sales, net of returns and allowances, were $6,600,000 for the full year 2024 compared to $13,100,000 in 2023. The $6,500,000 decrease in sales was primarily due to lower W4CC truck sales compared to the same period a year ago, which was offset by an increase in W56 truck sales, service revenue generated from operating company stable stalls and workhorse routes, drones as a service before the aero divestiture and other service revenue.

Cost of sales for the full year 2024 was $28,200,000 a decrease of $9,500,000 compared to $38,400,000 in 2023. The decrease in the cost of sales was primarily due to lower W4CC vehicle sales, partially offset by higher W56 vehicle sales and additional service revenue. The decrease was further driven by cost saving initiatives, including reduced employee cost of $3,000,000 improved inventory management resulting in savings of $4,400,000 lower consulting expenses of $1,500,000 and lower freight expense of $1,400,000 partially offset by higher depreciation and amortization expenses of $3,100,000 SG and A expenses for the full year 2024 were $42,500,000 a decrease of $13,100,000 compared to $55,600,000 in 2023. Lower SG and A expenses were primarily driven by $8,200,000 decrease in employee related expenses due to lower headcount, decrease of $2,000,000 in consulting expenses, a decrease in legal and professional expenses of $1,700,000 a decrease of $1,200,000 in marketing expense, a decrease in travel and entertainment expenses of $800,000 and lower corporate insurance of $600,000 partially offset by $1,100,000 increase in depreciation and IT related expenses. R and D expenses for the full year 2024 were $9,100,000 a decrease of $15,300,000 compared to $24,500,000 in 2023.

The decrease was primarily driven by a $6,900,000 decrease in employee compensation and related expenses due to a lower headcount a $4,100,000 decrease in prototype expenses related to development expenses for the W56, which was launched in 2023, a $3,400,000 decrease in consulting expense related to the W56178 wheelbase model, offset by development of the W56208 wheelbase model and a reduction of other expenses by $900,000 Other loss of $10,000,000 for the year ended 12/31/2023, represents the impairment of the company’s investment in Tropos. Interest expense net for the year ended 12/31/2024, was $22,200,000 compared to $8,700,000 in 2023. The increase was primarily due to an $11,900,000 loss on fair value of our convertible notes and an increase of $2,000,000 of interest expense compared to 1,500,000 of interest income in the prior year due to higher cash balances in the previous periods. During the year ended 12/31/2024, the institutional investor converted $31,200,000 of principal into common stock and the company recognized a 2,800,000 fair value net loss on conversion in net interest expense in the consolidated statements of operations. As of 12/31/2024, the estimated fair value of outstanding warrants totaled $5,800,000 During 2024, the company recorded 5,800,000 fair value net loss to the consolidated statements of operations related to outstanding warrants.

For the years ended December 2023, the company incurred taxable losses and therefore no provision for income tax has been recorded. During both 2024 and 2023, the company received a $100,000 as refund from prior year tax provision. Net loss for the full year 2024 was $101,800,000 compared to a net loss of $123,900,000 in 2023. Additionally, we executed a one for 12.5 reverse stock split two weeks ago, which was intended to increase the market price of our common stock and regain compliance with the minimum bid price requirements for continued listing on NASDAQ. Ensuring we remain listed on the national exchange significantly benefits our shareholders and business enables a wider diversity of options for us.

On Slide 10, you can find our balance sheet. As of 12/31/2024, the company had a total working capital of $8,200,000 including $4,600,000 in cash and cash equivalents, net accounts receivable of $500,000 and other receivables of $500,000 inventory net of reserves of $41,800,000 and accounts payable of $11,500,000 During 2024, we spent $4,100,000 on capital expenditures and expect the same level of spending in 2025. Now let’s turn to Slide 11 to discuss our financial runway. We recognize the importance of strength in our balance sheet and took significant cost reductions throughout 2024. We’ve reduced monthly operating cash to below $3,000,000 a month, which is materially lower than we were at a year ago.

And you can readily see the results on the income statement. As we look ahead, we will continue to focus on seeking additional opportunities to reduce costs, increase cash, ensure we have the financial runway to achieve our strategic goals. Like last year, given the level of uncertainty in the EV landscape right now, we tend to report on progress when it occurs. As a result, we will not be providing specific annual revenue or guidance at this time. And with that, let me turn the call back over to Rick.

Rick Dowd, CEO, Workhorse Group: Thanks, Bob. On Slide 12, you can see our priorities, and our near term priorities remain unchanged. We want to extend our financial runway while advancing our product roadmap and ramping up production, while securing more orders for our commercial electric vehicles. We fully recognize the EV adoption in the commercial space is taking far longer than previously forecasted or expected by industry experts. External factors, regulatory delays, shifting incentives, the lack of adequate charging infrastructure and unpredictable political jenas have created significant headwinds and slowed the pace of EV adoption and even the largest last mile fleets and at the federal government level.

But the fundamentals and business logic to transition to EVs in the last mile delivery segment remain the same. Medium duty commercial EVs make sense. They typically service customers across the 50 to 100 mile route and return to duty station every day, leaving plenty of time to be recharged. On a few of our fleet demos, customers were only having to charge our vehicles one to three times per week. Workhorse is delivering a no compromise truck that drivers love, one that just happens to be electric.

It performs on the job, reduces total cost of ownership, provides a real return on investment and it eliminates emissions. We are fighting hard to secure breakthrough high volume orders with national fleets and we think we are close to doing so. Simultaneously, we are working on smaller orders with a high focus along the I-five and I-ninety 5 corridors where states like California, Washington, New York and a few others have effective incentive programs or are mandating that their own state owned fleets start to adopt EV vehicles. As we look ahead to the rest of the year, we will continue to execute on our product roadmap and work diligently to gain momentum on the revenue side of the business. At the same time, we will make disciplined decisions to reduce costs, preserve our cash and extend our financial runway.

We look forward to providing updates as we make progress. Again, we have proven products that meet the needs of the last mile fleets who have publicly committed to transition to zero emission vehicles. The question remains, are these fleets truly still committed to that transition and when will they execute on their commitments and plans? Once again, thank you for your continued support and patience. With that, I’ll open up the call for questions.

Rob, can you take it over?

Rob, Conference Moderator: Thank you. Thank you. At this time, I’d like to hand the floor back to Mr. Doucke for closing remarks.

Rick Dowd, CEO, Workhorse Group: No, that’s it. I appreciate it. Those who are listening, hang in there with us. We’re doing our best, and we’ll work hard to secure those orders that we need so we can build great trucks and start to transition to EVs. Thanks, and have a great day.

Bye.

Rob, Conference Moderator: Thank you. This does conclude today’s teleconference. We thank you for your participation. You may now disconnect your lines at this time.

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