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spk07: Ladies and gentlemen, greetings, and welcome to the Workhorse Group's first quarter 2022 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 Mark. Sir, you may begin.
spk00: Thank you, Doug. Good morning, and welcome to all of you joining us on today's first quarter 2022 results call. Before we begin, I'd like to note that we have posted our results for the first quarter ending March 31st, 2022, as well as an accompanying press release and presentation in the investor relations section of our website. We've also released our 10Q this morning, and we'll be tracking with the posted presentation during the call today. So please follow along either from the link in the press release or through our website directly. And with that, let's get started. Turning to slide two, joining me on today's call are Rick Doubt, our CEO, and Bob Canan, our CFO. Moving to slide three, we have a straightforward agenda today. Following my brief opening remarks, I'll hand it over to Rick, who'll give you an update on the progress we've made in our strategic and financial priorities for our first quarter of this year. Bob will then walk us through our financial results for the quarter and touch on our 2022 guidance. We'll then take your questions. 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 subject to risks and uncertainties. You can find the full disclaimer statement in our form 10Q and other periodic filings with the SEC as well as on today's press release. I'll now turn the call over to Rick Dowd.
spk02: Rick? Thanks, Dan, and good morning, everyone. We appreciate you taking the time to join us today. Turning to slide five. Our first quarter was exactly what we expected it would be, a lot of hard work. We put our heads down, executed on our plans, and accomplished what we set out to do, building a rock-solid foundation based on our stabilized, fix-and-grow business model. In football terms, it was all about blocking and tackling. A key element of our progress is continuing to successfully find the right people to strengthen our organization. We further built out our highly experienced leadership team as well as significantly enhanced our engineering resources and technical expertise. We consolidated and relocated our headquarters in Sharonville, Ohio. The transformation of Union City is tracking the plan. Operationally, we met every milestone on the new product development roadmap we laid out last quarter. We also strengthened our financial position. As a result, we are right on track in executing our revised strategic plan to deliver a family of Class 3 to 6 electric vehicle last-mile delivery products both on the ground and in the air. Moving on to slide six, we continue to make progress in our initiatives across what we call our six P's, people, products, processes, partners, politics, and profits. Investing in a balanced fashion in these areas is critical to establishing a strong foundation to achieve our vision to be a pioneer in the transition to zero-emission commercial vehicles. Our team is incredibly detail-oriented and is relentlessly focused day in and day out on strengthening the building blocks of our foundation. We are confident the plans we have laid out and the progress we are making on these initiatives will enable our transition from a technology startup into an efficient commercial vehicle OEM. We also believe, and all the industry trends support, that we will continue to benefit from strong industry fundamentals, and tailwinds driving the transition from ICE to EV-powered vehicles in our sector. Let me now give you some important details about the progress we made during the quarter. Turning to slide seven, let me go through the key steps we took in delivering on our strategic priorities and building the strong foundations of growth. First this quarter, we further built out our experienced and talented leadership team. We have hired a new CIO. We have more than 30 years of supply chain and IT leadership experience at both leading OEMs and Tier 1 suppliers. He has also led IT teams in the government sector as well. We have added a new attorney as corporate counsel who brings five-plus years of business and commercial law experience to the team. We also have a search well underway to hire a VP of sales and marketing with significant commercial vehicle and transportation industry experience. Operationally, we have hired a director of quality with more than 35 years of quality systems experience at large OEMs including the powertrain and final vehicle assembly and supplier quality development. Lastly, we have hired a director of production control logistics who has 20-plus years of supply chain and lean systems experience at major tier one automotive suppliers. Additionally, we have rounded out our principal engineering ranks. We call them subject matter experts and now have them in place for chassis, electronics, controls, and body design work. Look forward to benefit from each of their unique perspectives and insights as we execute on our product roadmap. Moving to slide eight, I want to talk a bit about the readiness of our facilities. Last quarter, we opened our new vehicle design and testing technical center in Wixom, Michigan, to expand and enhance our design, engineering, and testing capabilities. This center has been a very fruitful investment for Workhorse. We have greatly expanded the breadth and depth of our engineering talent, which has already begun to enhance our designs, And we still have in the budget 15 open personal requisitions for engineers. Test equipment will be installed in Wixom by fourth quarter this year, bringing the site to a fully functional level by the end of the year. We continue to make significant progress in transforming and expanding our Union City Indiana plant into a world-class manufacturing complex. As you can see on slide 8 in the image in the middle of the left-hand side of the slide, the manufacturing plant is relit. Repairs and rehabilitation are on track. and near completion. The end-of-line dynamometer is expected to be installed and the facility will be 100% ready for production in Q3 of 2022. We are often asked how we can get to volume production with only a $15-20 million range invested at levels we have been discussing. The short answer is because we did not start with a blank piece of paper. We already have a well-built plant coupled with a rich history of manufacturing. We also reached an agreement in the quarter to take over two additional factories on our property, further expanding our manufacturing floor space and footprint. As an indication of how important these types of assets and capability are in the EV space, we have been approached by several firms to possibly undertake contract manufacturing for them at our Workhorse Ranch as early as this fall and in next year. We will carefully evaluate these opportunities and we'll update you when there's more information to share. As I mentioned on our call on March, we look forward to hosting many of you at our Investor and Analyst Day event in Union City in the fourth quarter. So you can see firsthand what we are now calling the Workhorse Ranch and also get a chance to drive our new generation of electric vans and trucks. We are also pleased that we completed the consolidation and relocation of our headquarters together with our advanced technology team in a new facility in Sharonville, Ohio. We are already realizing improved efficiencies and teamwork across the organization. The new prototype shop at that location is under construction, and we expect occupancy to begin in Q3 of this year. Finally, we're in the process of relocating our aerospace team into a larger space in Mason, Ohio, where we plan to start production in 2023. In summary, we have materially repositioned and significantly upgraded our infrastructure in the last nine months. Moving to slide nine, let me now provide an update on the progress on our revised product portfolio roadmap to deliver a family of electric-powered commercial vehicles across the Class III to Class VI segments. We accomplished exactly what we set out to do during the first quarter. As we previously communicated, our new product portfolio roadmap includes getting existing C1000s repaired and back on the road before building out and retiring them out. In parallel, we are focusing on our engineering team's efforts on developing two new truck chassis platforms in 2022-2024, while also partnering with Green Power on a third vehicle to bridge the product gap created by the decision to limit future C1000 production. I would also like to highlight that we have recently signed a referral agreement with ChargePoint to support our customers on their electrification journey as they transition to electric last-mile delivery vehicles. This partnership connects Workhorse customers with North America's largest charging network. Turning to slide 10, let me walk you through the current status of our major product platforms. Last quarter, we completed FMVSS testing for the C1000 and noted that several corrective actions were required to complete the full vehicle certification. We also fully tested the e-powertrain reliability, structural durability, and the payload capacity of the C1000 and identified several necessary corrective actions requiring a variety of safe, reliable vehicles for our customers. During the first quarter, we executed on these corrective actions and all FMDSS changes have been finalized and released by our engineering team. Front suspension design and vehicle bill of materials releases are now complete. Even with a bit of supply chain exposure in Shanghai, we are on track to return vehicles of service starting in August of this year and repair all 161 currently manufactured vehicles by year end. We plan to manufacture 50 to 75 additional C1000s by the end of the year from inventory currently on hand. We are working closely with a few customers to sell 100% of the vehicles in 2022. Of course, we will provide service and repair parts support after we retire the model later this year. Turning to the future and the W750 and W4CC, which will serve to bridge the gap between the C1000 product and future production of the W56 and W34 platforms. Workhorse and Green Power finalized several enhancements to the base vehicle and production of the first units is already scheduled. I believe our strategy to fill supply chain early for these vehicles is paying off for us. We plan on taking delivery of up to 1,500 chassis from Green Power completing the manufacturing process and delivering both cab chassis, the W4CC, and finished step vans, the W750, to customers in the United States and Canada, beginning as early as the third quarter of 2022 and throughout 2023. We are currently here in California at the ACT Expo in Long Beach, where the workforce team is introducing the W750 step van and riding ride and drive with a fully loaded 5,000-pound W4 cab chassis vehicle. It will be the first time since our March 1st announcement that we will have demo vehicles for customers to ride in and review. We are already excited to have our first purchase orders for this vehicle failing, all of which have successfully achieved California HBIP approval. We expect to realize further sales activities now that customers can see, drive, and fully review the vehicle. If you happen to be out here at the show, please stop by the booth and take a look or take a ride. We look forward to continuing to collaborate with Green Power and delivering the first trucks from our Union City plant later this year. Turning to the W56, which we introduced last quarter as the first new Workforce fully designed chassis platform. The W56 will serve the Class 5 and 66 delivery step van and truck market segments, and it builds on Workforce's experience building chassis systems for these classes of vehicles. The W56 has our shortest path to a homegrown design, tested, and economically viable BEV platform. It will come in three wheelbase sizes, addressing a TAM we estimate to be approximately $1.7 billion per year. We continue to meet all timing requirements and milestones from the beginning of production to the vehicles in Q3 of 2023. Our engineering and design teams have made significant progress in W56 design, sourcing decisions and contract commitments with proven commercial Vehicle industry Tier 1 flyers are already in place for more than 50% of the platform bill of materials. We expect to finalize design intent with supplier partners, along with a critical electrical component, chassis, and suspension part sourcing decisions by the end of Q2. This will ensure we have a production intent vehicles ready for testing in Q4 of this year and be in a position to complete testing and start full production on time in Q3 of 2023. Designing, testing, and producing the W56 is the number one program priority here at Workhorse. I manage those program reviews myself on a monthly basis. We look forward to continuing to update you on our progress on this critical program every quarter. Now I'll turn to the W34, which, as we mentioned in our last call, is a new Class 3 and 4 chassis that builds on the key technologies introduced by the E-Gen and the C1000 vehicle design. This vehicle will feature accessible low floor platform with improved ride and handling, efficient lightweight systems, and advanced driver technology. We estimate the addressable TAM for this segment of the commercial vehicle industry to be about $10.4 billion per year. We continue to expect the beginning of the production in 2024, which means we'll benefit from industry tailwinds as new mileage standards and emission standards take effect for commercial trucks in several regions of the country. The bottom line is that we have kept all the programs on time and on budget, while adding skilled staff to ensure we continue to hit our aggressive milestones. Turning to slide 11, we are continuing to invest in our aerospace business and drone technologies. We achieved several important milestones that we reached during the quarter, and a very important year ahead of us in terms of product development. Last quarter, we announced that the Federal Aviation Administration provided us with approval to pursue tight certification for the Horsefly TM delivery drone in 2022-23. We continue to fly under Part 107 certification. We are in the final development and testing phase for our vehicle-launched drones with industry-leading payload, range, and safe delivery capabilities. Focusing on the success we had last quarter, obtaining several grants from the U.S. Department We are also pursuing additional contracts and grants with the USDA to provide monitoring, data procurement, and analytics as far as demonstration projects. Through our dedicated development effort, we also designed a market-leading package delivery winch and are continuing extensive field testing. We are currently flying to North Dakota and Mississippi to support government programs. On the staffing front, we continue to add engineers and pilots to the team to ensure we can deliver for our customers. We're excited about the potential for market expansion. We are experiencing our drone operations and are exploring additional projects with both federal and state governments, as well as larger retailers. With that, I'll now turn the call to Bob to discuss our financial results for the quarter.
spk01: Thanks, Rick. Let's turn to slide 12. Our results illustrate the progress our team continues to make to strengthen our financial position and drive greater operating efficiency. which will allow us to execute our product portfolio plans to deliver value for customers and shareholders. Sales net of returns and allowances for the first quarter of 2022 were recorded at 14,000 compared to 521,000 in the first quarter of 2021. The decrease in sales was primarily related to the decrease in volume of truck sales in connection with the previous recall of our C1000 vehicle. Cost of sales decreased to 3.9 million from 6.2 million in the same period last year. The decrease in cost of sales is primarily due to the decrease in volume of truck sales and costs associated with the initial production of this E-Series vehicle platform. Selling general administrative expenses increased to $11.9 million and $6.9 million in the same period last year. The increase in SGA expense was primarily driven by an increase of $2.9 million in employee-related expenses, including equity compensation, from the increased headcount and the appointments of our new executive leadership team. Additionally, there was a $2.1 million increase in professional services related to legal expenses. The increases are partially offset by a $1.4 million decrease in consulting fees due to the company's initiative to reduce reliance on external resources by hiring internal resources. R&D expenses were nearly unchanged at $4 million compared to $3.9 million the same period last year. Net interest expense was $2.2 million compared to a $14.9 million income in the same period last year. The decrease in interest expense is primarily driven by a $0.4 million increase in fair value of our convertible notes in Q1, as compared to a $15.5 million decrease in the fair value in the prior year. Additionally, we recognize the gain on the forgiveness of our PPP term note during the three months ended March 31, 2021, which is non-recurring during the current period. Other loss decreased to no loss compared to $136 million in the same period last year. Decrease in other losses related to unfavorable changes in fair value of our prior investment in Lordstown Motors Corp., which was sold entirely in Q3 of 2021. Net loss was $22 million compared to a net loss of $120 million in the same period last year. Loss from operations in the first quarter was $19 million compared to $16 million in the same period last year. Turning to 2013, as of March 31st, 2022, the company had approximately $160 million in cash and cash equivalents. On April 6th, 2022, the company entered into an agreement with Hytro Capital to change their output to a 4% senior security convertible dose for approximately $29.7 million of the company's common stock. This transaction eliminates the remaining debt from workforce's balance sheet, and we're really excited about what we've accomplished on this front. Strengthening our financial position has been a key priority With the deleveraging complete, we now have additional time, flexibility, and the ability to focus our full financial resources on key investments in our people and the business so we can execute our plans. Our capital spending plans for 2022 remain unchanged at between $25 and $35 million. Slide 14 covers our 2022 guidance, which we are reaffirming. As we continue our planned progressive ramp in manufacturing, assuming supply chain visibility remains unchanged, we continue to expect to and generate at least $25 million in revenue. Our guidance for the year is also backloaded, so we're still not expecting to produce any vehicles in the first half of 2022. I'll now turn the call back to Rick to wrap up the call.
spk02: Thanks, Bob. I want to briefly discuss our Q2 priorities on slide 15. We intend to complete the critical executive level staffing here at Workforce, focused on commercial, engineering, supply chain, and IT systems. following the significant hires we made over the past nine months. We will execute on our product roadmap timelines. We will continue the expansion and the renovations at the Workhorse Ranch in order to launch products in Q3 of this year. The team will begin to both acquire, transfer, and install test and validation equipment at both Michigan and Ohio technical centers. We also expect to complete the first phase of common system deployment in terms of production, lean systems, ERP, and HRM systems. And finally, we expect to secure customer order commitments for our new products, W750, W4C, and the limited number of C1000 vans we expect to repair and build this year. Before we turn the call into Q&A, I want to reemphasize three important points from our call today on slide 16. First, we are doing exactly what we said we would do to build a lock-style foundation for the company And that always starts with people and a strong balance sheet. We have hired experienced, capable executives from critical positions, strengthening our operational, supply chain, and technical capabilities. And we solidified our financial position by removing all debt from our balance sheet. Second, our strategic product roadmap plan is on track, and we made important progress during the quarter. We will be the pioneers in the transition to zero-emission commercial vehicles, targeting specific classes of vehicles in the last mile delivery segment. And third, based on direct feedback, we remain confident in the opportunities ahead to deliver electric vehicles to our customers that they want, and in turn, will deliver long-term shareholder value. That concludes our prepared remarks. Thank you again for your time this morning. We look forward to continuing to update you on our progress, and we're now ready to open the call for your questions. Doug, please provide the appropriate instructions. Operator, still there?
spk07: Yes, I am. Sorry, I was on mute. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Colin Rush with Oppenheimer and Company. Please proceed with your question.
spk04: Thanks so much, guys. Could you talk a little bit about the customer dynamics now that you've got a broader portfolio of trucks and you've shown some evidence that you're going to be able to deliver on these things? Just talk about how much leverage you're getting with those customers and the depth of demand that you're starting to see with those folks as you move forward with those relationships.
spk02: As you said about the customer dynamics,
spk04: Yeah, the customer dynamics, yeah, the relationships and how broadly they're accepting the range of vehicles.
spk02: We've had several meetings with our customers, some of the original customers we had for the C1000. We were able to bring them into Union City, as you remember, to demonstrate the W4CC. They drove the vehicle. They gave us positive feedback. That actually gave us direct input on how well we think we can sell the cab chassis version of the W750. So that gave us very good confidence. We had a meeting with one of those customers. Recently, it was last Thursday in the Midwest. They're looking forward to buy several hundred of those vehicles, I'll say. This week, we have first, just the first time we've demonstrated the W750. We showed it to our board of directors last Tuesday in Ohio. We shipped it out to California and cleaned it up over the weekend. It's on display. We have a lot of traffic already. We opened the show up last night at 4 o'clock, so. We have, after the show ends this week, we have a plan, four or five weeks, where we're going to take the vehicles around California and then to a couple other areas in the country to show the customers they can experience the drive. So I think, give me about 45 days, I'll be able to tell you a lot more. But pretty much the feedback we have is that we're focused in the right areas, Class 5-6, Class 3-4, last mile delivery. It's a segment that's not too crowded, to be quite honest. And even though we have a setback on the C-1000, we think we can still be one of the first to market that segment.
spk04: Okay, that's super helpful. And then just in terms of the people investment that you're making right now, certainly what we've seen is an awful lot of leverage from software at the operating system level for the vehicles. I'm just curious how much investment you're making in software engineers and how you're approaching that challenge of getting the operating software for these vehicles really tuned up as you start to bring them to market.
spk02: That's a great question. I mean, one of the secrets is not just the hardware on these vehicles. As an ex-Tesla driver, I understand how important that software is in that vehicle. We are lucky. One of the good things we had on both the E-Gen and the C1000, we had the Metron system where we get feedback about every 10 seconds on every vehicle we have on the road. I think some of the E-Gens have been on the road now since 2017-18. We still continue to get that feedback. Pretty reliable system we have out there. So, I think we've doubled our investment in software engineers since I got here. I know we have for sure in aerospace. I think we almost quadrupled on aerospace, and we've almost doubled on the software side of the house as well. So we understand that's important. That's one of our key areas where we have some open recs. The battle and the fight for talent, especially in the software side of the house, is really hard, and we've got to go out and make sure we get our fair share of the good, qualified people.
spk04: Okay. Thanks so much, guys.
spk02: Thanks, Colin.
spk07: Our next question comes from the line of Jeff Osborne with Cowan & Company. Please proceed with your question.
spk05: Yeah, good morning. Thanks for taking the questions. Just a couple on my end. I was wondering how do we think about the financial ramifications of the remediation of the 161 trucks in the second half of the year? You know, that in addition to what you intend to produce, the 50 to 75, how should we think about modeling that?
spk01: Well, I think this is Bob, Jeff. You know, the First of all, with the write-down and inventory that we took in the fourth quarter, we basically, any of those trucks that were built, we had a write-down of their value, which was So I think, you know, modeling those is reality is the revenue will be there, but the cost will probably approximate the revenue. So on the C-1000s, you know, I wouldn't expect much contribution there. From a P&L perspective, however, obviously from cash perspective, they're very accretive. And that's how we look at it.
spk05: Just to be clear, Bob, that's the 161, not the 50 to 75? Correct. And then the 50 to 75, I assume those would be negative gross margin to start, and then as we move into 23 and volumes ramp up, the gross margins would turn neutral to positive, or how do we think about the midterm trajectory on that front?
spk01: Well, I think the 50 to 75, C1000, I think it's a very similar story. The parts on hand are obviously written down. We'll have to spend some more, so it might be a little bit negative, as you said, but it shouldn't be dramatic.
spk05: I got it. And then you've had – go ahead.
spk02: Jeff, the C1000 should be fully built out behind us by the end of the year. And as we transition here in the third quarter, we'll start producing and shipping the W4CCs. And then in the fourth quarter, we'll start shipping the W750s. We've got the design finalized now. The source is all done for the 750s.
spk05: That's great to hear. Maybe just the last modeling question is on the OPEX front, you've certainly added a lot of people and had a lot of shuffling around. Would you, you know, if this were a baseball game, are we in the seventh, eighth inning of that? And is the current sort of run rate with maybe some modest growth in the second half how we should think about it? Or what's the OPEX trajectory?
spk02: Executive level, people will directly report to me, well, I think we're in the eighth inning. We need a good sales commercial leader here. That person will then get to hire the regional team. You can take a look at the country. There needs to be someone on the West Coast up and down the I-5 corridor. There needs to be someone in the New England region from New York City up and down the I-95 corridor. And then we'll take a look at what we need in the Midwest or the Southeast, Southwest region. But that can come later. So executive ranks eighth, eighth inning. I think in the engineering ranks, we're still probably in the third or fourth inning. We've got the SMEs on board now. First of all, we've got the CTO and our head of vehicle design Within 90 days, we've been joining the company. They've gone out and found the SMEs. Several of them have been retired for some of the OEMs. We had to wait for them to get through the first quarter. They're now on board, and they're out doing their recruiting for the next layer now. And then we've got a pretty solid team, right? So I think we're early there. Supply chain team, we've got to continue to build that up as we continue to ramp up our production. And then we've got some work to do in the back offices, in the HR, IT, and the finance. We're probably still early third or fourth inning in those areas.
spk05: Got it. And the last one I had was just on the competitive front. You mentioned that, you know, with the C1000, the Class 3, that you're early, but there's a lot of new entrants that you see on the show floor at ACT last night that, you know, are much better capitalized than you folks. And so there's certainly a lot of people coming in 23 and 24. And so I'm just curious, you know, how you view the competitive front as you ramp up.
spk02: Yeah, I've been here now just a little over nine months. I got to go to my first ACT show last year. And when I left that show last year, my thoughts were half the companies here are not real companies. They don't know what it means to build a factory. They don't know what it means to source parts, test and design vehicles. And I did a quick walk through the show last year. There's some potential real strong players here who have deep pockets or big sponsors. They're going to emerge. They're competing in a lower space than we are now. They may come into our space down the road, but they still have their handful launching their Class 3 vehicles or Class 2 vehicles. There's still several companies out here who are in what I'll call the conversion mode, where they're 100% reliant on outside people for chassis. And as you know, in the industry now, chassis supply is constrained, as the big OEMs are using their valuable parts for more profitable vehicles, I'll say. So I feel very comfortable that if we execute on our plans, and I'm confident we have the team now to do so, that we can be still first to market in our segment, and we'll see how the chips lay, all right? Talking about building a factory or building multiple factories in a short period versus actually having a factory and retrofitting is a huge differentiator for us here at Workhorse. In my career, I probably built 12 or 14 plants. It doesn't happen in six months. You don't build five or six plants in 18 months. You've got to build plants. It takes us minimally here in North America 18 to 24 months to buy the land, put the infrastructure in, and oh, by the way, you have to hire the people. One of our competitors I know has a beautiful factory. They only have eight hourly people in that factory right now. How the hell are they going to launch in the fourth quarter this year? You tell me.
spk05: Thanks for the pointed response. I appreciate it. Thanks, Rick. Thanks.
spk07: Our next question comes from the line of Craig Irwin with Ross Capital Partners. Please proceed with your question.
spk06: All right. Good morning, and thank you for taking my question. So, Rick, the progress since we met last Act Expo has really been impressive. And I would say the capital structure is the one thing that I would call out as the most visible progress that you've made so far. So I just want to commend the progress of the company. So, you know, as you talked to people yesterday, the first day of the show, was there anything new that you were hearing from your customers that anything people were saying specifically about the vehicle on the floor or the future offering that you're presenting in collaboration with Green Power? You know, what can you share with us to help us with visibility on customer uptake?
spk02: Good question. I was on the floor last night for only an hour and a half, two hours. One of the largest – Last month, delivery guys came by and were all over our vehicle, said this is exactly what we need. Can you also build a larger version? So the version we had in the floor today was 750. That customer said he definitely needs 1,000 cubic feet and up to 1,200. That's absolutely in our product roadmap for the W56. The big issue I think we heard right now is there's a strong demand, a strong demand we expected when we started this journey for the cab chassis version. There are people in this industry, as you know, in the commercial vehicle, there's a lot of upfitters. While we were originally focused on last mile delivery, it looks like we can sell some electrified cab chassis vehicles that can then go to upfitters, whether they want to put a reefer on it or a box or a flatbed. And I think we're learning as we come into this industry just how complex the upfitting portion of the business is. Okay, that's one. Two, I think one thing that's common from last year to this year is the infrastructure has to be in place. And we saw the infrastructure bill that came out last year with about $15 billion towards infrastructure, both for EV vehicles and also for buses. So we hope to participate in some of that. And recently, we've seen some of the initiatives by the Department of Energy to put forward investments in low-cost loans for battery manufacturers here in North America. So I think the two risks for the industry are infrastructure and battery supply. I don't think battery costs are coming out as fast as people projected. I had one customer ask me why I can't get to $100 a kilowatt-hour, and I offered him, I said, you go buy the batteries for me, and I'll give you $100 a kilowatt-hour batteries. And he couldn't do that right now. Only Tesla can do that right now because they're building only two vehicles. So those are the two big linchpins I see. But the tailwinds, based on everything we see, the demand by investors for ESG-type companies And the commitments by some of the largest fleets in the world, especially here in North America, to be carbon neutral by 2035 or 2040 are real. And so that means we've got to be able to have the right vehicles, and then we have to have the right infrastructure to do it. That's part of our reason to go work with ChargePoint. I got to go out there and tour their facilities out in California earlier in the quarter. Very impressive, good array of not just hardware but software as well. And so fleets have to figure out how to make this transition, too.
spk06: Thank you for that. So I was hoping you might be able to give us a little bit more color on the trucks you're making in partnership with Green Power. You know, I know you're the kind of guy that doesn't make announcements, doesn't make commitments like this lightly, and there is an understanding that there was a down payment made to Green Power. Can you talk about your confidence in the customer demand You obviously do see something you consider very, very real. Put that cash down to make the vehicles. And then what are you learning about this partnership? I mean, how is this something that could potentially grow the capabilities of Workhorse longer term? Bob, you want to comment about the down payment?
spk01: We made more orders, and I'll come back about that. Yeah, so when you look at our existing parts, there's a kind of one-time down payment we made, and then there's a deposit we make on each chassis order. And so that one time occurred in the first quarter, so over $34.5 million cash that we used, $6.4 million was for that down payment. And then that will be recovered over time as we actually receive and pay for the chassis. So that was a big chunk of our cash flow for the quarter.
spk06: Understood, understood. And actually, since we're talking about cash flow, it seems that SG&A had a fairly heavy contribution of non-cash items. Can you help us sort of unpack the 11.9 down to a cash number? Yeah.
spk01: I know stock comp's a part of it, but... So, yeah, we had 11.9 of SG&A, which about $2.3 million was non-cash stock comp. as we've been building out the management team and that hitting the P&L side, but obviously not the cash side. And then you've got a little bit of depreciation there, but it's kind of a rounding error. But really it's the stock comp that gets us down to probably a more cash equivalent, even though it's on the P&L side, of about $9.2 million.
spk03: Excellent.
spk02: Thank you for taking that question. I'll hop back in the queue. Hey, Craig, I'll make a couple comments here. So in terms of Green Power, I'm really happy with the progress we made. It took us most of the first quarter to iron out the agreement from a legal standpoint. We have like a 58- or 68-page legal agreement between us and Green Power, pretty detailed. We initiated weekly program reviews at the presidential level. That's happening. Then we do a monthly program review at my level. To give you an example, on the W4CC, we're able to have some of the modifications we want for the North American market actually installed at Green Powers Factory in Asia, which saves us some of the transfer debt. The box install for the W750, that's all been sourced to a local supplier here in North America. That's what we have here at the show, and we're working very closely to follow all their sourcing. I think they have got over 300 parts they've got to source themselves. And then we're working with that supplier to make sure we build our manufacturing plans at Union City. We're starting to lay out the inventory flow of both the cab chassis that come from Asia through California, how much we're going to have on the ground in Union City, what our production time is. We've already got the tack times there. Then how much we're going to have in our finish pool versus how much is going to go right to our customers. So we're doing a lot of detailed work. It's what I'll call mind-numbing, engineering, mathematical work. both from a supply chain and engineering standpoint, but we're confident we get there and we're at our price points we expect to sell on the market based on our customer feedback and the margins we think we're going to be at. Hopefully that gives you some color on the upcoming launch of the W750W4CC.
spk07: Our next question comes from the line of Greg Lewis with BTIG. Please proceed with your question.
spk08: Yeah, thank you, and good morning. Just one question for me. You know, Rick, you kind of mentioned it in your prepared remarks about the potential to kind of expand around union and head contract manufacturing. You know, realizing that, you know, the focus now is on getting your trucks out the door, you know, over, I don't know, the next 12, 24 months. Can you talk a little bit how you see the potential, you know, move into contract manufacturing playing out for Warhorse?
spk02: Well, it's great. When I got here, I didn't think we planned on doing contract manufacturing, but the fact that a lot of the EV companies don't even have factories. A lot of them are doing stall build type situations. I think we were caught pleasantly surprised by the inquiries we had. We have multiple inquiries right now. The challenge we have is, okay, can we handle everything we're doing ourselves, which is a hell of a lot, between C1000s, W750, W4CC, W56, W34. can we not distract the organization by taking on contract manufacturing? The good news is we hired a VP of manufacturing services in late first quarter. He has the bandwidth right now to take on some of the quoting activity with our finance team. And so we have at least one quote out there right now. We'll find out whether we're selected to be that contract manufacturer here in the next 90 days. And we are entertaining another one right now, which is a another electric vehicle, a different class of vehicles. So it goes back to our vision of being pioneers in the transition to zero-emission commercial vehicles. So I think we can do it. I think we have the floor space. We'll have to add some talent, specifically supply chain and program management. And we can get the hourly people for sure at Union City. It's a hungry location. where we used to employ well over 800 people in a payday, and now we're only doing about 100. So the community wants us to be successful, and we want to win up in Union City.
spk08: Okay, great. Hey, thank you for that.
spk02: Thanks, Greg.
spk07: Our next question comes from the line of Mike Sliske with DA Davidson. Please proceed with your question.
spk03: Uh, yes. Hello guys. Good morning. Um, I wanted to maybe touch, uh, first briefly on the OpEx outlook and the OpEx in the last quarter here. I want to confirm it. It was a 2.1 million increase in professional services on legal. Was that one time in nature? And, um, that's my first part of the question. And the other part was when you consolidated into Sharonville, did that result in any cost savings on, you know, overhead, real estate, et cetera?
spk01: Sure. This is Bob. Um, So the legal and professional, I would characterize as maybe not permanent, but I can't call it one-time either. I think with all the different things that we've got going on and trying to advance the business, I think we'll be in that front range for a little while here. But it's probably not permanent. As far as the OpEx savings on the move, we will save one facility. But I wouldn't, from a modeling perspective, I wouldn't factor in net savings. I think it'll be a little bit more expense, actually, once we get done with everything. The other facility that we're consolidating out of, we actually own. So I wouldn't build anything from a savings perspective in your model for that consolidation.
spk02: But Mike, you can't model in if you don't have enough parking spots for your people, parking in the grass or parking on the neighbor's parking lot. The facilities we had were, I'd say, minor league at best. How's that? So we recruit people in. Now we have a world-class place, well-lit, well-equipped, enough parking, big prototype area. We can actually fly drones indoors when we finish the prototype center. It's got high roofs. So I'm proud to be sitting there now versus before. I used to be embarrassed to bring some people in to get interviewed here. How's that?
spk01: Can't put a number on that. And I would say, you know, especially as a finance person, I do. Hard to put any kind of numbers on this, but just having people in the same room, the collaboration has already improved just in a short time. And can't value that, but it's definitely been powerful.
spk03: Sure, sure. That makes sense. Can I turn to the orders for the 750? You've got your first purchase order. Can you maybe share a little bit of detail there? Is it more for a previous C1000 customer, someone totally new? And can you share if it's a van or just a chassis cab?
spk02: Actually, it's not with a previous customer. It's with two different customers. We're not publishing, I don't think, yet right now who those customers are. We had dinner with one of those customers last night. They explained how big their fleet is in North America and the opportunity to move from ICE-powered vehicles to EV-powered vehicles is significant. Also, in that meeting we had last night with one of the largest commercial vehicle operators in all of North America, they told us their plan between now and 2025 is to convert 50% of their vehicles to EV power systems. And so we're pretty encouraged by those opportunities right now.
spk03: Great. I also want to ask about the split between the W750 and the chassis cab model. Are there any impacts differently I mean, if you're not doing the update yourself, there's probably a few thousand EBITDA that you're not going to be getting. But from a margin perspective, is it similar? Is there any kind of changes there between the two models?
spk01: Yeah, so as you pointed out, obviously the revenue and the margin is a little bit less in the shift. We've shifted quite a bit to the cap chassis. However, I would say that the EBITDA impact is not huge, probably in the one to one and a half million range.
spk03: You mean overall?
spk01: Overall.
spk03: Did you say one to one and a half million? Okay. Yeah. All right. Great. Thanks, Mike. Yeah, thanks so much, guys. Appreciate it.
spk07: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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