Workhorse Group Inc. (NASDAQ: WKHS) hopes to borrow money to scale production of its composite-body electric trucks even as growing interest in its patented truck-based Horsefly drone could accelerate its business plan.
The Cincinnati-based last-mile delivery company said Wednesday it conducted 54 Horsefly test missions with United Parcel Service (NYSE: UPS) and the Virginia Center for Innovative Technology in late April.
“Interest has ballooned due to the COVID-19 virus, the individual state stay-at-home orders and the general feeling that some of these changes may have a permanent impact on the last-mile delivery sector,” CEO Duane Hughes said on the company’s first-quarter earnings call with analysts.
The initial use would be to supplement emergency response in COVID-19 patient care. The Horsefly, once seen as a novelty for use in rural last-mile delivery, could become mainstream.
“We are hearing from many businesses that this transition is not a temporary one and that we need to adapt to a new normal,” Hughes said.
During the quarter, Workhorse filed a provisional application to increase patent protection on Horsefly, including several key components like the ground control station, aircraft structure and the capability for winch deliveries.
Workhorse expects to build two of its Class 5 C-Series battery-powered electric trucks a day this quarter at its plant in Union City, Indiana, where workers continue preproduction efforts as an “essential business” amid the coronavirus pandemic.
Workers are being paid with a $1.4 million Paycheck Protection Program Small Business Administration loan.
The health crisis delayed certification of a final safety standard on the new trucks until May 21.
“We are still on track for the second-quarter timeline of 300-400 delivery trucks produced in 2020 as long as our supply chain remains intact and we obtain the financing,” Hughes said.
Preproduction progress and stability in its mostly U.S.-based supply chain allowed Workhorse to conduct several ride-and-drive events with Ryder System (NYSE: R) customers in advance of putting trucks into Ryder’s sales channel.
Workhorse has a contract with UPS for 1,000 of its 650-cubic-foot models and a smaller deal with DHL, the German multinational package delivery and supply chain management company.
Workhorse, which has survived financially by issuing new stock and a series of hedge fund loans, is talking to banks about a $40 million revolving line of credit that would allow it to scale production.
The company had $16.8 million in cash as of March 31, enough to get through initial production this quarter. It expects to have the credit line in place by the end of June, according to Chief Financial Officer Steve Schrader.
Sales of $84,000 in the first quarter trailed year-ago revenue of $364,000 by 77%. The decrease was primarily due to fewer trucks being shipped, Schrader said.
Net income was $4.8 million, compared with a net loss of $6.3 million in the first quarter of 2019.
First-quarter research and development expenses increased to $1.9 million from $1.4 million a year ago due to finalizing the design of the C-Series.