Editor’s Note: Updates with analyst comment and intraday share price.
Workhorse Group delivered 14 electric delivery vans to customers in the second quarter but it is going back to the drawing board to figure out how to add more cargo capacity before it resumes ramping up production.
In many ways, the Workhorse (NASDAQ: WKHS) earnings report for the April to June period resembled previous quarters — a tale of delays and supplier issues.
After ousting CEO Duane Hughes in favor of former Delphi Technologies CEO Rick Dauch, the Cincinnati-based company said it is undertaking a full design review of its composite body electric vans.
“Our initial production run of the C-1000 has confirmed the excitement around that product, which we have shown to existing customers and dealers and are beginning to deliver in limited quantities,” Dauch said in a press release. “What is clear from the initial customer feedback is that we need to further increase the payload capacity of our vehicles.”
Dauch provided few details other than saying the focus would be on the C-1000 van. Workhorse has produced 133 C-Series vans in 650-and 1,000-cubic foot varieties this year.
“There is no question there will be demand for electric vehicles among the parcel carriers. For final mile players, the total cost of ownership of an electric vehicle vs an internal combustion engine vehicle is starkly in favor of EVs, said Third Bridge senior analyst Patrick Donnelly. “Now the biggest factor for EV manufacturers is how quickly can they ramp their production at an affordable cost.”
On the earnings call, Dauch provided no update of Workhorse’s challenge to the awarding of a multibillion-dollar contract for new U.S. Postal Service mail trucks.
Workhorse, which proposed all-electric Next Generation Delivery Vehicles, lost the competition to defense contractor Oshkosh Truck Co., which plans a mixture of internal combustion engine and electric trucks for the Postal Service. Workhorse filed its appeal in the U.S. Court of Federal Claims.
“We delivered 14 vans in the second quarter. We anticipate the remainder will be leased or sold to niche markets within the next 12 months,” Dauch said on a call with analysts Monday. “The majority of customers need a higher payload vehicle that serves a much larger market segment.”
The rest of a backlog of 8,000 vehicles will get unknown changes that Dauch plans to work through as part of an overall business review.
“Thankfully, [customers] are being quite patient with us as we work through our internal design production challenges.”Rick Dauch, CEO, Workhorse Group
“We have a lot of work to do around vehicle design, bill of material cost and vicious lean material operations,” he said, adding that he will apply principles of the vaunted Toyota Production System to the Workhorse plant in Union City, Indiana.
“Thankfully [customers] are being quite patient with us as we work through our internal design production challenges.”
Cashing out of Lordstown Motors
Workhorse sold 72% of its stake in startup electric pickup truck maker Lordstown Motors Corp. to switch its licensed technology in exchange for a 10% stake in the company. Lordstown (NASDAQ: RIDE) has filed a “notice of going concern” with the Securities and Exchange Commission, saying it might not survive the year without new money.
The ouster of Lordstown CEO Steve Burns and Chief Financial Officer Julio Rodriguez in June and federal investigations into allegations of inflated orders for the Endurance pickup have combined to send shares lower.
Burns was CEO of Workhorse until being forced out in February 2019. He started Lordstown with the purchase of a shuttered General Motors Co. car assembly plant and a loan from GM. Burns took Lordstown public through a reverse merger with special purpose acquisition company DiamondPeak Holdings in 2020.
Workhorse received about $79 million from the stock sale. The technology licensed was for an electric pickup that Workhorse at one time took customer deposits for but did not have the funds to build.
By the numbers
Q2 sales were $1.2 million compared to $92,000 in the second quarter of 2020. The main difference was booking revenue from delivering 14 trucks versus just one in the year-ago quarter.
Workhorse’s net loss was $43.6 million, compared to a net loss of $131.3 million a year ago. The Q2 operating loss was $22.7 million compared to $7 million in the same period last year.
The cost of goods sold ballooned to $14.8 million from $1.5 million a year ago because more trucks were sold. Workhorse wrote down the value of work in process and finished inventory to its market value. Employee, consulting, manufacturing overhead and freight costs all rose.
The company had $156.6 million in cash on hand at the end of Q2 before adding the proceeds of the Lordtown Motors share sale.
Workhorse shares traded up 3.07% or 31 cents higher at $10.41 intraday Monday.