Workhorse Group, Inc.

Ladies and gentlemen, greetings and welcome to the Workhorse Group's fourth quarter and full year 2022 investor 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 2022 results call. Before we begin, I'd like to note that we've posted the results for the fourth quarter and full year ended December 31st, 2022 via press release. We also issued a second press release this morning that covers the planned board of directors transition for the annual upcoming meeting of shareholders. You can find both these press releases as well as the accompanying presentation for this call in the investor relations section of our website. We'll be tracking to the posted presentation during the call So please follow along, either from the link in the press release or through the website directly. And with that, let's get started. Joining me on today's call, shown on slide two, are Rick Douck, our CEO, and Bob Ganan, our CFO. The agenda today is found on slide three. Following my opening remarks, I'll hand the call over to Rick. We'll give you an update on the progress we've made on our strategic and operational priorities during the fourth quarter and the beginning of 2023. Bob will then walk us through our financial results for the quarter and full year and then provide our outlook for the year ahead in 2023. After Rick's summary, we'll take your questions. Moving to slide four, you can find our forward-looking statement. As you know, some of the comments that will be made today are forward-looking and therefore are subject to certain provisions and as a result are subject to risks and uncertainties. You can find the full disclaimer statement in our 10-K or other periodic filings on file with the SEC, as well as in today's press release. And with that, I'll now turn the call over to Rick Dowd.

Rick? Thanks, Dan, and good morning, everyone. Thank you for taking the time to join us today and for your continued interest in and support of Workhorse. Over the past 12 months, we've taken decisive actions across the organization to position Workhorse for long-term success. We made great progress in the fourth quarter and are poised for a breakout year in 2023. We're encouraged by the progress we've made and are confident that our stakeholders will see the benefit of these actions in the near future. Let's start with some of our highlights and key accomplishments from the fourth quarter on slide five. Getting the right people in the right seats is the foundation of building a company that can successfully make the transition from being a technology startup into becoming a real commercial EV OEM. It takes relevant industry experience, functional expertise, and a selfless work ethic to be part of the Workhorse team. Throughout last year, we talked extensively about the key hires we made across our executive leadership, engineering, operational, commercial, administrative, and financial teams, all of whom are instrumental in driving our go-forward strategy. We are pleased to have completed building out our strong team, hiring almost 160 people last year, which is the right one to execute our business initiatives and achieve our vision of pioneering the transition to zero emission commercial vehicles. We also need to have the right systems and processes in place, and they need to be operating effective. We have worked diligently on these important basic building blocks, from engineering design revision control, fundamental lean manufacturing planning, to adopting appropriate human resource systems. These sorts of things do not sound critical, but they are absolutely critical to running an effective business on a day-to-day basis. In terms of our new commercial vehicle product roadmaps, in the fourth quarter, we delivered 23 W4CC vehicles to customers. We resolved our shipping issues with Green Power and now have more than 100 base W4CC vehicles at Union City ready for production in Q1. As it relates to our W750 step van, pilot builds are underway right now. and we start regular production of this Class IV vehicle in Q2 this year. We also began shipping Tropos vehicles assembled at our Union City facility and are looking forward to ramping up production on that vehicle each quarter in 2023. Most importantly, we are on track to unveil the W56 at the upcoming NTA Work Truck Show and begin production of this game-changing vehicle in Q3 this year. Launching four new commercial vehicles over the course of 12 months takes a lot of hard work and coordination. Trust me. Finally, we are doing the necessary market data analysis for the future design of the WNEXT, which we plan to bring to market in 2025. As you know, in December, we held our first analyst day at our revitalized world-class manufacturing complex in Union City, Indiana. We thank those of you who were able to make the trip to Union City back in December. And we were excited to show you the real, tangible progress we're making across our electric vehicle and drone product families firsthand, as well as show off our transform manufacturing operations and deep bench of talent. Looking at the facilities outside of the Union City Plant, we have concluded equipping our Wixom Michigan Technical Center. Our Sharonville, Ohio prototype shop is near completion, just waiting for a few key components to hook up some electricity. And we are installing production lines in our drone manufacturing facility in Mason, Ohio, as we speak. The takeaway summary from all of this hard work on facilities that we are, we now have the physical infrastructure and tools in place to design, test, and build world-class commercial vehicles, both wheeled and rotor-based products. Drilling down a bit more into Aero, we continue to advance our drone technology development and are excited about the tremendous opportunities in this space. We conducted demonstrations of our horse fly during the first two months of 2023, first by flying simultaneous package deliveries by multiple aircraft for prospective last mile delivery customer, and secondly, conducting a successful field test for internal operations of a separate last mile delivery customer. I will say that both of these potential customers were highly impressed with what our workhorse product and our flight team can do. We also successfully field tested its humanitarian and logistics operations, or Halo drone, internationally. The Arrow team also won a state grant to support beyond visual line of sight work in Michigan, and we continue to fly in support of the US Department of Agriculture. We will continue to work on securing additional federal and state level grants or long term contracts for our Arrow business. We expect to start the production of drones and generate revenue in this business later this year. Our Stables and Stalls initiative in the fourth quarter successfully managed deliveries to the peak holiday season, gaining valuable insight into the challenges of running and managing a fleet of aging ICE vehicles. We are using our first EV, the inaugural W750, in commercial service on a daily basis and expect to fully electrify our Stables and Stalls fleet by the end of Q2. We continue to explore options to establish a second Stables and Stalls operation in an incentive-based state sometime this year. Finally, we resolved a number of legacy and regulatory issues, which has been a critical mandate for our new team. This includes proposed settlements to resolve the securities class action lawsuit and related shareholder derivative actions, and a notice from the SEC that has previously disclosed investigation concluded with a recommendation not to enforce action against the company. These are important steps that allow us to further sharpen our focus and our resources on our strategic priorities. In Q4, we made the tough decision to discontinue the C1000 program. Our team did a thorough engineering review and conducted extensive durability testing. However, we decided that platform could not be redesigned or repaired sufficiently to put a safe, reliable, and durable vehicle on the road for our customers. Therefore, the best step for our company was to reallocate engineering and supply chain resources towards the development and production of our other products. We expect previously built C1000 units will be decommissioned, disassembled, and disposed of by the end of Q1 2023. Turning to slide six, we continue to make important progress executing on our commercial vehicle product roadmaps throughout the fourth quarter with the goal of delivering high quality, safe, and reliable electric vehicles to our customers. Starting with our class four offerings, the W4CC and the W750. Our supply pipeline is now functioning much better, and we are buttoning down the manufacturing quality control processes for both vehicles. As I mentioned before, we were pleased to be able to produce and deliver 23 W4CC vehicles in the fourth quarter. We are encouraged by the strong customer interest and expect to continue to ramp up production and delivery of this vehicle in 2023. W750 pilot bills are taking place right now, and the company will start production of that vehicle in Q2. We have plenty of customer interest and a need to field many of these vehicles in our stable installed operations. Turning to the W56, which we first spoke of a little over a year ago, as the first new workhorse fully designed and purpose-built Class 56 chassis platform. This program has remained on track, both on time basis and budget basis since its inception, thanks to our engineering and supply chain teams. And we expect to start production in Q3 this year. You can see a rendering image on the lower right-hand side of the slide. It's an impressive vehicle with superior driver visibility and turning radius. Having driven one of the program builds myself, I can tell you it's a serious, capable work truck. We plan to showcase the new production Intent Step Van vehicle next week at the NTH Work Truck Show in Indianapolis to allow prospective customers to see the product firsthand for the first time. Ride and drives of this vehicle will be offered in May at the ACT Show in Anaheim. And customer demo vehicles will be in the field starting in late Q2. Moving to the WNEXT vehicle, which we outlined at analyst day. We are combining our previous and extensive class three and four vehicle field experience to develop a next generation vehicle that with an accessible low floor frame, improve ride and handling, efficient lightweight systems, and advanced safety technology. We expect to begin production of this vehicle in 2025. And the new vehicle platform will continue come to market just as the government mandates for Class IV to VI commercial vehicles start to take effect. Moving to our aerospace update on slide seven, we continue to make significant progress in advancing development of our drones during the fourth quarter as we target two compelling and growing markets, package delivery and agricultural and infrastructure data acquisition. Let me start with our horsefly platform, which can deliver 10 pounds and travel over 10 miles a payload capability we believe is market-leading in the nascent drone industry. In January, we successfully conducted an extensive demonstration for a last-mile delivery company. As you can see on the slide, our demo consisted of 50 nonstop deliveries with three drones, two of which were in constant automatic or autonomous flight operational mode. In our second test, we flew a series of demonstrations for a different last mile delivery company to validate a concept they are considering to support their own internal flight operations. We had a completely different flight team do this demo, and again, it could not have gone any better. We had a third field team travel to Europe to train a foreign flight crew that had significant drone experience, and then the newly trained team successfully field tested our Halo drone internationally. Additionally, we have also partnered with the U.S. Department of Agriculture and secured new federal and state-level grants, including Michigan, to help accelerate the fielding of this product. And we are actively exploring new opportunities for collaboration with both federal and state government agencies. On slide eight, as I mentioned earlier, we have completely transformed our Union City manufacturing facility into a world-class operation with open, flexible space with room to grow. I was amazed yesterday when I was there watching four different vehicles be put together by our new team up at Union City. The plant continues to ramp up production of the W4CC, the W750 pilot builds, Tropos vehicles, and soon the W56 line will open up. I am pleased we are finally getting the plant into production mode. We will be installing the end of line dyno and Q2, our new assembly line, and a dedicated paint line is being installed ahead on site of the W56 production in Q3. Additionally, we are in the process of installing production lines for our drones that are engineering technical design and production facility in Mason, Ohio, so we can start regular production in Q2 this year. With that, I'll now turn the call over to Bob to discuss our financial results.