Workhorse Group, Inc.

Ladies and gentlemen, greetings and welcome to Workhorse Group's fourth quarter and full year 2021 investor conference call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Workhorse Group's Vice President of Corporate Development and Communications, Stan March. Sir, you may begin.

Thank you, Daryl. Good morning and welcome to all of you joining us on today's fourth quarter and full year 2021 results call. Before we begin, I'd like to note that we've posted our results for the fourth quarter and full year end of December 31st, 2021 via press release, as well as an accompanying presentation in the investor relations section of our website. We've also released our form 10-K this morning. We'll be tracking with the posted presentation during the call, so please follow along either through the website directly or via download on your PC. And with that, let's get started. Turning to slide two, Joining me on today's call is Rick Dauk, our CEO, and Bob Janan, our new CFO who joined us in January. Moving to slide three, we have a straightforward agenda today. Following my open remarks, I'll hand it over to Rick. We'll give you an update on our strategic priorities, including our new product portfolio roadmap. Bob will then walk us through the financial results for the quarter and the full year. And once Bob's finished with our outlook for the year ahead, Rick will provide a wrap up and then we'll take your questions. Moving on to some housekeeping items. On our disclaimer, you'll find on slide four, some of the comments that will be made today are forward-looking and therefore are subject to certain provisions as well as risks and uncertainties. You can find the full disclaimer statement in our 2021 Form 10-K, other filings that we make with the SEC as well as in today's press release. And with these details out of the way, I'd like to turn the call over to Rick Dauk. Rick?

Thanks, Stan. I'm thrilled to welcome both you and Bob to your first earnings call here at Workhorse, and welcome to the team. Good morning, everyone. We appreciate you taking the time to join us today, and for your patience as we work to get our hands around the company and develop a viable business plan for Workhorse. Turning to slide five, it's now been seven months since I joined the company. During that time, we have completed a deep dive review of every aspect of the business, taking significant action and made difficult decisions to strengthen both the team and business foundations of the company. I am confident we are on the right path and believe strongly in our ability to pioneer the transition to zero emission commercial vehicles. Let's jump right into how we executed on our priorities in Q4 and then review our future plans for the company. Turning to slide six, on last quarter's earnings call, we laid out clear priorities for the fourth quarter. I'm pleased to say we accomplished the majority of these objectives. There's a little bit more work to do on our 2023 and 2024 business plans. We accomplished a lot. One, we built out our executive leadership team. Two, we significantly enhanced our engineering and technical expertise. Three, we opened a new technical center in Wixom, Michigan. Four, we stabilized and strengthened our financial position. And five, we finalized our 2022 budget. Most importantly, we have developed a revised and executable strategic product portfolio roadmap for our future electric-powered delivery van and truck offerings, which includes developing two new truck chassis platforms that we'll lay out in today's presentation. Moving on to slide seven. Each of the priorities we executed on in Q4 are a deliberate part of our three-year business plan to stabilize, profitably grow, and create shareholder value here at Workhorse. We made progress on several initiatives across our six P's, people, products, processes, partners, politics, and profits. Getting the right people on the team establishes the foundation for our future success. We are largely complete in filling critical open leadership positions with highly capable and proven industry veterans. We continue to believe that long-term value creation comes by following a series of successive and deliberate steps taken to build a business. You cannot skip any step in the process or avoid the hard work required to move across each level to achieve success. Here at Workhorse, we are taking the necessary steps to transition the company from our historical roots as a prototype technology startup into a full-blown commercial vehicle OEM. After a costly misstep with the C1000, our journey is underway, and over the next three years, I expect we can and we will accomplish all of our key business objectives. Our journey will not be easy, nor for the faint of heart. It will require us to stay focused on our customers and serve them with industry-leading technology, make decisions about what is core and what is not core long-term, to develop and implement common lean systems, and then properly grow the business. Along the way, we should benefit from strong industry fundamentals and tailwinds driving the transition from ICE to EV-powered vehicles in our sector. We are confident that relentless and focused execution across each step will help Workhorse emerge successful and create long-term value for our shareholders and other stakeholders. Not every startup will survive the shakeout that will occur in the nascent commercial EV vehicle sector. Those who execute successfully will emerge as the winners. As you'll see on slide eight, As I've said earlier, we have now largely completed our overhaul of Workhorse's executive leadership team with several key appointments in Q4 and early 2022. This included adding Bob Janan as CFO. Bob brings more than 25 years of senior finance and C-suite leadership experience to Workhorse. He most recently served as both the CEO and CFO for Privately Held Family RV Group, the fifth largest RV dealer in the country. Kerry Roraff joined as CHRO, and Brad Hartzell joined as VP of Manufacturing Services in February. Both are accomplished auto industry veterans. In addition, Ben Drake joined as the VP of Government Affairs in January after serving as the Department of Defense Leader for Energy Resiliency Policy and experienced as a professional Senate Energy Policy staff member. We have already seen the positive impact of these new executives joining the Workhorse team. including Bob's deep involvement in our 2022 budget planning and the 2021 10K processes. We have a few remaining open positions that we want to fill during the first half of the year, including finding an experienced CIO and adding sales leadership capabilities from the transportation industry. I feel we have built an experienced, capable leadership team with a breadth of expertise across finances, electric vehicles, automotive, commercial truck, and related industries to be successful here at Workhorse. Turning to slide nine, we recently opened our new technical center in Wixom, Michigan, to expand and enhance our design, engineering, and testing capabilities. We've moved aggressively to staff the new facility. In the last 90 days, we have hired experienced automotive industry veterans with more than 270 years of cumulative design experience and expertise in chassis, suspension, drivetrain, energy storage, and supply chain management. We are in the process of transferring Acquiring and installing full vehicle and component testing equipment at Wixom with a target to be fully operational there in Q3 of this year. During April 2022, we plan to consolidate and relocate our headquarters together with our advanced technology team here in Sharonville, Ohio. This will help us improve efficiency and teamwork between product engineering, purchasing, manufacturing engineering, quality and production planning. During our last call in November, I mentioned our plan to create a world-class manufacturing complex in Union City, Indiana. This transformation is well underway, and our plant staff is working hard to be ready for the start of production in Q3 of this year, and I know they will be. We have acquired or leased additional facilities on the Union City campus to help us streamline our supply chain value stream to include having an environmentally controlled facility to safely manage battery storage. We are planning to host an analyst event in Union City in the fourth quarter, so you'll be able to see firsthand what we are now calling the Workhorse Ranch and test drive our new generation of electric vans and trucks. Moving to slide 10, with our organization strengthened and our operational complex revival underway, for the past few months we've turned our attention to our most significant deliverable in Q4. Our team has developed a revised strategic product portfolio roadmap to deliver a family of electric commercial vehicles across a Class III through Class VI segments. This is not some PowerPoint exercise. It's a realistic and achievable plan to deliver the types of vehicles that our customers and the markets we serve are asking for in the last mile delivery segment as we make the shift to electrification, what I call the customer and market-driven technology and products. Our new product portfolio roadmap includes getting existing C1000s repaired and back on the road. We have decided to limit the overall production of the C1000 model, and I will explain our decision in a moment. We are focusing our engineering team's efforts on developing two new truck chassis platforms in 2022 and 2024, while also partnering with Green Power, as announced in a joint release this morning that I will discuss in further detail shortly, on a third vehicle to bridge the product gap between our decision to limit the C1000 production. Moving to slide 11. Let me provide you more details on our future plans for the C1000. Over the past four months, we have completed FMVSS testing, identifying several corrective actions required to complete full vehicle certification. During this process, we also took the opportunity to fully test the e-powertrain reliability and the structural durability and payload capacity of the C1000. We identified several necessary corrective actions required to provide a safe, reliable vehicle to our customers. These actions include addressing both vehicle design and supplier quality issues. We need to replace the front suspension and enhance the rear suspension on the C1000. Our supplier partners need to address part quality issues on e-powertrain subsystems. As a result, we will need to repair all previously produced C1000s. After completing these repairs, we will only build an additional 50 to 75 C-1000s by the year end using existing on-hand inventory. We do have firm purchase orders for all C-1000 vehicles that we will repair and build in 2022. Long term, we have determined that the combination of a limited payload capacity and unsustainable bill of materials costs make the C-1000 economically unviable, and as a result, we will not move forward with full volume production. This is a significant and costly setback for us here at Workhorse. We will take the painful lessons learned from our C1000 experience, combine them with extensive and positive field data from our 300-plus eGen vehicles still in service in the field, and apply them to our next generation of vehicles. We will, of course, continue to provide service and parts to customers for both eGen and C1000 vehicles on the road today. Turning to slide 12, let me introduce the W56. which will be the first all-new workhorse chassis platform to hit the market in Q3 of 2023. The W56 will serve the Class 5 and Class 6 delivery step van and truck market segments. It builds on workhorses' decades of experience building chassis systems for these classes of vehicles. The W56 is our shortest path to a homegrown design, tested, and economically viable BEV platform. It will come in three wheelbase sizes and addresses a TAM we estimate to be approximately $1.7 billion per year. We are building upon existing and proven workhorse chassis and e-powertrain system designs, and we will use readily available parts sourced from well-established commercial vehicle Tier 1 suppliers. Our expanded engineering and design teams have been hard at work over the past two and a half months on the W563's design, And we will soon finalize design intent with supplier partners, allowing for critical drivetrain, energy storage, chassis, and suspension sourcing decisions by the end of Q2. This will ensure we have prototype vehicles ready for testing in Q4 this year and be in a position to start full production on time in Q3 of 2023. Designing, testing, and producing the W56 is priority number one here at Workhorse. And I am personally leading cross-functional program use on a monthly basis on this program. We will keep you apprised of our progress on this critical program every quarter going forward. Next up will be the W34, which is a new Class III and IV chassis that builds on the key technologies first introduced on the E-Gen and C1000 vehicle designs. The W34 will feature the accessible low-floor platform, efficient lightweight systems, and our proven e-powertrain systems. We estimate the addressable TAM for this segment of the commercial vehicle industry to be about $10.4 billion per year. Production is expected to start in 2024, which means we will be coming to market just as new mileage and emission standards take effect for commercial trucks in several regions of the country. Lastly, turning to slide 13, is the W750, which will serve to bridge the gap between the C1000 product and future production of the W56 and W34 platforms. Workhorse has signed a strategic supplier agreement with Green Power Motor Company that demonstrates the value we provide as a strategic partner. Under the agreement, we will take delivery of up to 1,500 chassis from Green Power, complete the manufacturing process at Union City, and deliver both cab chassis and finished step vans to customers in the United States and Canada beginning in the third quarter of 2022 and throughout 2023. The W750 is a Class IV vehicle that is both FMDSS and CMDSS certified, has up to 150 miles of all-electric range, a payload capacity of 5,000 pounds, as well as standard 60-kilowatt DC fast charging and optional 60-kilowatt wireless charging capabilities. We look forward to collaborating with Green Power and delivering the first trucks and vans from our Union City plant later this year. We have shared our revised product portfolio plans in person with our two largest customers who came to Union City to test drive the 750 and review our C1000 test results. Based on their feedback, we are confident we can sell all of our C1000s by year end. Our customers are currently assessing how to proceed in transitioning previous vehicle orders into new purchase orders for the W750 and the future W56 and W34 vehicles. We owe them working demo vehicles before they can make their final order decisions. Turning to slide 14, we also continue to invest in our drone system technologies and achieve several important milestones during the quarter. First, we have continued to invest in the aerospace business by expanding both our technical capabilities and our team skills. We have quadrupled our software engineering team, tripled the number of certified pilots, and added experienced FAA veterans to the team. and we transferred supply chain teams to the aerospace team. The application we submitted last year to the Federal Aviation Administration received approval to pursue type certification for the horse flight delivery drone in 2022 and 23. We believe we have also reached the final development phase for our vehicle launch drones with industry-leading payload, range, and safety delivery capabilities. I'm extremely encouraged by the progress the team's made in the two quarters plus I've been here. Lastly, we are awarded multiple contracts and grants with the U.S. Department of Agriculture to provide sensor monitoring, data procurement, and analytics as part of a demonstration in the areas of agriculture, waterway, and land management. This expands the overall addressable market for our base drone technology. We're exploring additional projects with both federal and state governments and potential medical service customers. I look forward to updating everyone on our progress as we continue to develop our aerospace capabilities across multiple in-market segments. Based upon direct feedback from both commercial and government customers, I am convinced that we are on the cutting edge with our drone system technology with regards to both small package delivery and aerial mapping. With that business update completed, I'll now turn the call over to Bob to discuss our financial results.