Workhorse Group, Inc.

Greetings, and welcome to Workhorse Group's second quarter 2022 investor call. As a reminder, this conference 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, Brock. Good morning, and welcome to all of you joining us on today's second quarter 2022 results call. Before we begin, I'd like to note that we've posted our results for the second quarter ending June 30th, 2022 via press release. You can also find this release as well as an accompanying presentation in the investor relations section of our website. We've also filed our second quarter form 10Q this morning. 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. As you can see on slide two, joining me on today's call are Rick Douck, our CEO, and Bob Ganan, our CFO. We have a straightforward agenda found on slide three. Following my opening remarks, I'll hand it over to Rick, who'll give you an update on the progress we've made on our strategic and financial priorities for the second quarter of this year. Bob will then walk us through our financial results for the quarter and cover our 2022 guidance. Then we'll take your questions. Moving to some other important items, please note that in today's press release, we provide a note to specify what we mean when we use the term orders, which refers to a customer's contractual commitment to purchase, as well as defining what we mean by a slot reservation, which means a commitment to make a portion of our production capacity available and for which is secured by a customer deposit. Our disclaimer can be found on slide four. As you know, some of the comments that we've 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 Form 10-Q and other periodic filings on file with the SEC, as well as in today's press release. I'll now turn the call over to Rick Dauk.

Rick? Thanks, Dan, and good morning, everyone. Thanks for taking the time to join us today. My one-year anniversary as WorkCourse's CEO, was just one week ago on August 2nd, and what an interesting and challenging 370 days it has been. On slide five, we have identified some of our major accomplishments as the new leadership team here at Workhorse. Over the past year, we have addressed several issues while developing a three-year business plan to transition from a technology startup company into a full-fledged OEM, providing best-in-class commercial EVs. An organization's collective success starts with recruiting hiring and retaining experienced, professional, and capable staff. I identified the need to reshape the leadership team here at Workhorse shortly after I arrived. There is not one part of the organization which has not been strengthened over the past year. From reshaping my direct reports in the corporate staff to building an operations team from scratch to adding the necessary experience, talent, and depth to our engineering and technical staffs, We have completely rebuilt the organization, and more importantly, the capability and skill sets of the Workhorse team. I will not belabor the point further, but will simply say this cohesive leadership group is now full of accountable, driven, and capable individuals who are fully aligned on our critical business initiatives. And as a team, we are just getting started on our journey together. We also undertook a number of critical actions in a timely fashion to strengthen the company in the near term, such as grounding and recalling the C-1000s, eliminating all of our debt, and dropping the USPS lawsuit. While painful, these were absolutely the harder right decisions to make for our company. When I got to Workhorse, we were a one-trick pony from a product perspective. The only vehicle we could offer customers was the unprofitable C-1000. and we needed to ground, redesign, and repair all of those. After taking a few weeks to assess the C1000, the marketplace, and our competitors, we quickly pivoted and developed and are now fully executing on a new three-year product portfolio roadmap and will be one of the only players in the last mile EV medium truck space with a full lineup of Class III through Class VI commercial products in production in 2024. We have upgraded Workhorse's facility infrastructure. opening and fully staffing the design and technology center in Wixom, Michigan, in less than six months, as well as moving to a new headquarters, prototype, and advanced engineering center here in Sharonville, Ohio, just three months ago. Our manufacturing complex in Union City, Indiana, has been expanded, basically doubling the available production floor space. The plant has been completely revitalized and is ready for production now. We have slimmed down our warehouse locations from three to one, and co-located it on the Workhorse Ranch up in Union City. Our aerospace business plan has been revised, product plans developed, the team expanded, and we also relocated them into a new site in Q2 as well. We are now targeting multiple market segments for revenue opportunities and developing unique drones and systems for each. We're very excited about the revenue and probability potential of our aerospace business. All of these initiatives are easy to talk about or show on a PowerPoint slide, but trust me, they are extremely complicated, Super Bowl-type challenging to actually execute in less than one year with a team of individuals who, for the most part, had never worked together in their career. I could not be prouder of the Workhorse team at all levels of the organization, which speaks to my earlier point about bringing together talented, selfless leaders and aligning the organization around core values and a common vision. Finally, we are gaining commercial momentum thanks to all the developments I just referenced. We have been awarded multiple federal and state government grants for aerospace. We have signed our first contract manufacturing agreement and have been able to secure a significant purchase order for our commercial vehicles. Demos of our last mile delivery vans will be ready in Q4 for the W750 and the first quarter of 2023 for the W56. both with industry-leading benchmark payload capacities. I will stop there and move to the specifics of our second quarter activities. But make no mistake, Workhorse is a fundamentally different company today than it was a year ago. We have a full medium-duty EB portfolio, both four-wheeled and four-bladed. We have rejuvenated our facilities and infrastructure. We have no debt. And most importantly, we have a more capable, talented, and competitive staff and workforce compared to what we all knew one year ago. I expect us to continue forward and hit our stride as a team in the year to come. Moving to slide six. During the second quarter, we continue to make progress executing our product roadmaps and building a solid foundation based on our stabilized, fixing, grow business model. As I mentioned earlier, the foundation of our company is our people. At every level of the organization, they are critical to driving our success. During the quarter, we hired additional highly experienced, next-level functional engineering and operational staff for critical positions throughout the organization. The talent that we are attracting is top-notch, and it reflects the strength of what we are building here at Workhorse. We have hired a new VP of Commercial Vehicle Sales and Marketing who will join us next month. She is an experienced and well-respected sales leader with both OEM truck and Tier 1 supplier sales experience in the commercial vehicle and transportation industries, and deep knowledge of EV technology. In engineering, we have now filled five of our subject matter expert positions and have been continuing to build their teams. In commercial vehicles, we have Adrian Rory, body engineering, Ken Nettle, electrical systems, Jason McConnell, controls and telematics, and Dave Reed, body and chassis. These engineers collectively bring 134 years of automotive experience on board, and we're glad to have them. In aerospace, our new chief engineer, Jared Patton, brings a broad experience in systems engineering development and testing from both the Air Force and specialized defense contractor worlds to drive our UAV product development programs forward. In operations, we now have experienced in-house leaders in place across all of the critical operating functions, manufacturing at the corporate staff and plant level, in quality systems, and across multi-functions in the supply chain. These groups likewise bring a wealth of essential automotive experience, especially in lean operating principles as we move to start production here in Q3. We have also added important skills in our back office and administrative functional groups, including an experienced internal auditor, a top-notch paralegal, as well as important new IT and finance staff capabilities. I will say that we are about 95% complete in filling out our leadership team. Looking to the back half of the year, we will focus on rounding out our commercial and aftermarket and service teams. With our product plans on track and the workhorse ranch ready to produce vehicles, we can now confidently field our commercial team and allow them to go out and sell our products. Turning to slide seven, let me update you on our major product platforms. With the suspension redesign complete and due care FM DFS testing underway, we expect to be returning repaired C1000s to customers in September. Over the past nine months, we have redesigned over 26% of the parts on the C1000, and we feel we now have a safe, reliable, and capable vehicle to sell to our customers. This took us a bit longer than we expected. After completion of the final testing next week, we will move to repair and sell the remaining 161 currently manufactured vehicles sitting at Union City. We then plan to manufacture 50 to 74 additional C1000s by year-end from inventory on hand. And, of course, we will provide service and repair parts support as we retire the model at the end of the year. Turning to the W750 and W4CC vehicles, which you will recall serves as a bridge for the gap between the C1000 product and the future production of W56 and W34 platforms. We have been showcasing these vehicles across the U.S., and customer feedback has been strong. Our product's ability to carry 5,000 pounds of cargo is a clear differentiator in the market. We are the only truck, I think, at the ACT show that actually was fully loaded. The program is on track. Test shipments of the base vehicles have been received at our plant recently, and we will start regular production of the W4CC and Q3 and the W750 and Q4 of 2022. We already have 17 vehicles at Union City today and multiple shipments ordered and on their way for Q3 and Q4 production. Turning to the W56, which we introduced two quarters ago as the first new workhorse fully designed and purpose-built chassis platform. The W56 will serve the Class 5 and 6 delivery step van and truck market segments. We continue to execute our plan for the W56 and are on track to begin production for the vehicles in Q3 of 2023. As a reminder, W56 has the shortest path to full BEV platform production, leveraging existing workhorse designs, and are over 9 million plus miles of service time on the road with the E-JEB vehicle. And we'll have various wheelbase options with a common parts bin. We have chosen proven tier one suppliers, majority located here in North America for this vehicle, and have sourcing decisions and contract commitments already in place for about 75% of the platform bill of materials. An early mule was assembled in Wixom last month. We expect to have production intent vehicles ready for testing in Q4. customer demo vehicles in Q1 of 23, and be in a position to complete testing in the second quarter and start full production on time in the Q3. It's a strict production cadence following automotive practices. I have mentioned that we continue to make major improvements in Workhorse's facilities. Our true gem in the company is the Transform Union Cities plant, which is fast becoming a world-class manufacturing complex right here in America's heartland. You can see from the overhead pictures on slide 8 that we have or will soon be completing major improvements to every piece of our footprint there. And just so you can see it all for yourselves, we will be hosting our promised analyst day at the plant on December 7, 2022, so please save the date. In addition to seeing the revitalized facility in the manufacturing mode, we will also have product ride and drives, drone operations, and the chance to meet the extended workhorse team. We plan to share further details at a later date. On slide nine, we have a few images for you to help visualize what has been accomplished today. We truly are customer ready, and those customers that have visited have been very impressed. I've met with staff members that have returned after being away from the plant for several years that cannot believe that this is the same facility. From the outside to the inside, with new lighting and paint, we have methodically transformed the Union City facility to a world-class operation. The remaining open items include installing an end-of-line dynamometer in early Q1-23, further upgrading our security and IT systems, and putting our leak tests and paint capabilities in place next spring and summer. With the revitalized plant facilities, process improvements, and high-caliber operating staff we added to our team, we have business opportunities appearing that Workhorse did not have in the past. I've mentioned in the last couple of quarterly calls that we had a number of contract manufacturing opportunities we were evaluating, and we can announce our first major CM award today. On slide 10, you can see a couple of images of products that will be rolling out of Union City in the fourth quarter this year. We have signed a contract manufacturing and assembly agreement with Tropos Technologies. Beginning in Q4, we will be assembling their subclass one vehicles for distribution in the U.S. market. Together with Tropos, we are targeting a volume capability of about 2,000 units per year once we get through the ramp-up phase and have the ability to increase that as market demand dictates. This is not the only contract manufacturing opportunity we are pursuing, as we are seeing firms outside of the Class 3-6 space asking for us to evaluate our own capabilities to support their manufacturing needs. Stay tuned. While other EV companies talk about their needs to build plants, In less than one year, we have upgraded and doubled our manufacturing floor space and will be in production mode in August this year. Moving to slide 11, I want to share a few more pictures of our facility improvements. We moved the company's aerospace business into a new facility in Mason, Ohio in Q2. This much larger space, it's about 75,000 square feet, and it's about a 15 minute drive from our new headquarters in Sharonville, Ohio. It gives us the administrative engineering, warehousing, and manufacturing space we need since we plan to start prototype drone production in Q3 2022. In fact, we are in prototype drone production. We have not talked much about the aerospace business in our recent calls, given the need for us to focus on our commercial vehicle business and associated product roadmaps. But I feel very comfortable where we are on the commercial vehicle side, and I'm spending more personal time with the aerospace business. But I want to give you a bit of insight into why we find the UAS business so compelling and exciting. Moving to slide 12, we present some market data for the most recent TEAL study on UAS trends in the coming years. The top left plot shows the total estimated civil UAS production growth forecast. However, if you dig a little deeper into the key segments of the overall UAS growth, you will see the delivery forecast looks a lot like the proverbial hockey stick. and that the construction and agricultural uses of drones are also set to increase substantially at CAJA projections that I have never experienced in my business career before. It's truly exciting. We are optimistic about the overall UAS markets, including both the package delivery as well as the mapping and sensor-based segment as our interaction with current and potential customers support what the TEAL study is saying about the market dynamics. That significant growth is coming, and coming sooner than most realize. To meet this market trend, we have added several key leaders that have been seasoned by relevant military or airline industry experience. We have doubled the number of certified drone pilots and significantly expanded both our hardware and software engineering staffs. As we continue to invest in our drone operations, we have achieved several important product milestones shown on slide 13. They've also been a very important year for our development efforts. As a result, we have begun manufacturing UAS mules in the plant to validate our processes, the orange birds you see in the picture. We are just beginning the process of laying out higher-volume manufacturing and supply chain processes. Our new aero site provides us with lots of room to grow over the next few years. Potential aerospace customers continue to affirm that we have the market-leading payload and range capabilities. We believe that our robust and patent-protected wench delivery system capable of delivering and, if need be, retracting 10-pound packages, is unique in the industry. We are continuing to fly almost daily for development and testing purposes. We have made vast improvements in our drone's autonomous operational capabilities and have multiple customer demonstrations and tests planned in Q3 and the fourth quarter of this year. We continue to fly under Part 107 certification. We have also been flying in support of the U.S. Department of Agriculture to provide monitoring, data procurement and analytics as part of its demonstration projects, and we're awarded multiple grants to do so. We are currently flying in Ohio, North Dakota, and Mississippi to support multiple government programs. We're excited about our drone operations and are exploring additional projects with federal and state governments, as well as large retailers and contractors. With that, I'll now turn the call over to Bob to discuss our financial results.