Workhorse Group, Inc.

Ladies and gentlemen, greetings and welcome to the Workhorse Group's third quarter 2021 investor conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Workhorse Group's Vice President of Finance, Tony Fiore. Sir, you may begin.

Thank you, Operator. Good morning and welcome to all of you joining us today for today's third quarter 2021 results call. My name is Tony Fiore and I am Workhorse's Vice President of Finance. Before we begin, I'd like to note that we have posted our Q3 2021 results as well as an accompanying presentation via press release and in the investor relations section of our website. We will be tracking with the posted presentation during the call, so please follow along either from the link in the press release or through our website directly. And with that, let's get started. Slide two, please. As you can see on the slide, you will be hearing from three members of the management team during the call. Joining me today is Greg Ackerson, our interim CFO, and Rick Douck, our CEO. Moving to slide three. We have a straightforward agenda today. Following my remarks, I will hand the mic over to Greg. We'll cover WorkHorse's Q3 2021 results. Once Greg is finished, he will pass the baton to Rick, who will take your questions after a formal comment and presentation after they are wrapped up. Moving to slide four. Moving to some housekeeping items and our disclaimer on slide four, some of the comments that will be made today are forward-looking and therefore are subject to certain provisions and are subject to risks and uncertainties. You can find the full disclaimer statement in our regulatory filings and in today's press release. With these details out of the way, I will turn the call over to Greg Akerson.

Greg? Thanks, Tony. Before I begin, I would like to say, while this is my second opportunity to take the reins as WorkHorse's CFO, this is my first earnings call. It is an honor to be given the opportunity and a very exciting time for me professionally. With that, let's get to the quarterly results by turning to slide five. Sales, net of returns and allowances decreased by 1.2 million, resulting in negative 0.6 million of net sales for the quarter. The driver of this decrease was the sales allowance recorded during the period, which is related to our C-1000 recall in September. Moving to cost of sales, In Q3 2021, we saw an increase to $11.5 million from $2.8 million in the third quarter of 2020, which was driven by several factors. On the slide, you can see them in order of descending impact. The largest impact was the inventory write-down for the quarter. Additionally, our C-1000 costs were higher year over year due to higher volumes, consulting, plant, and other expenses, in addition to higher warranty costs for the quarter. Looking at our SG&A expenses, we saw a $4.6 million increase year over year due to increases in our severance, technical staffing, and stock-based compensation expenses. We also saw higher consulting and insurance costs compared to the previous year's quarter. Moving on to slide six, on our R&D line, we saw an increase of $1.2 million due to increases in our technical staff, as well as consulting and costs associated with our prototype programs. Below the operating loss, we saw some large swings in results for a number of reasons. On the interest line, we saw income of $18.6 million compared to interest expense of $74.3 million in the prior period. The largest driver was the decrease in expenses related to the fair value adjustments and losses on the conversions of our convertible notes. We also had a decrease in losses recognized on the redemption of our Series B preferred stock from the prior period. In the category of other losses, Workhorse realized a loss on the sale of our Lordstown investment of $77.1 million compared to zero in the prior year. Overall, we had a net loss of $81.1 million for the third quarter of 2021 compared to $84.1 million in the third quarter of 2020. Let me shift gears now and talk about what we have been doing to impact what I think is the most critical financial aspect of our business, that being the management of our cash resources. Let's now take a look at the details which are included on slide seven. As of September 30th, we had $230.4 million in cash and cash equivalents on our balance sheet. At our current projected burn rate, we have enough cash to fund our ongoing operations for quite some time before we believe we will need additional funding. However, we must remain diligent in our management of our cash resources, and that is exactly what we are doing. Let me tell you what we have accomplished in managing our cash resources during the quarter. First, we slowed inbound material shipments and freight costs. We have also reduced third party consulting fees by replacing higher cost external resources with in-house talent. We withdrew from the costly USPS lawsuit which reduces legal and related lobbying costs, and we have right-sized our plant staff by approximately 25% without losing key talent. Additionally, we recently converted 172.5 million of debt into equity, resulting in a future reduction of 1.7 million per quarter in cash interest payments. What all this means is that exiting Q3, we have reduced cash outflows by more than 30% sequentially. That is a significant improvement in a relatively short period of time. That completes my financial summary. I will now turn the call over to Rick Dauk for his prepared remarks.