Workhorse Group, Inc.

Ladies and gentlemen, greetings and welcome to WorkHorses Group third quarter 2023 investor call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, WorkHorse Group Vice President of Corporate Development and Communications, Dan March. Sir, you may begin.

Thank you, Sherry. Good morning and welcome to all of you joining us on today's third quarter 2023 results call. Before we begin, I'd like to note that we have posted our results for the third quarter, ended September 30th, 2023, via press release, and have also filed our latest 10-Q and a separate 8-K. You can find this release, as well as the accompanying presentation, as well as the SEC filings and the investor relations section of our website. We will be tracking with the posted presentation during the call, so please follow along either through the link in the press release or through the website directly. Joining me on today's call are Rick Douck, our CEO, and Bob Ganan, our CFO. The agenda for today can be found on slide three. Following my opening remarks, I'll hand it over to Rick, who will give you an update on the success that we've made in our strategic and operational priorities during the third quarter. Bob will then walk us through our financial results for the quarter and our revised 2023 full-year guidance. Rick will then wrap up before we open the call for questions. Our disclaimer can be found on slide five, excuse me, slide four. Some of the comments that we made today are forward-looking and are therefore subject to certain provisions as well as to risks and uncertainties. You can find the full disclaimer statement in our periodic filings with the SEC as well as in today's press release. I'll now turn the call over to Rick Douck.

Rick? Thanks, Stan. Good morning, everyone. Thank you all for taking the time to join us today in your continued support of Workhorse. We're here to talk about our achievements and results for the third quarter and the actions we are taking to position Workhorse for both near-term and long-term success. And speaking about the third quarter, what we're talking about is a tale of two cities. On the one hand, we made important steps forward across our product roadmap that will set the stage for us to drive significant profitable growth in 2024 and beyond in all areas within our control. On the other hand, our results this quarter and our outlook for the remainder of 2023 were significantly impacted by our inability to secure HVIP vouchers in the third quarter. I'm pleased to report that we have recently resolved this voucher availability issue with help from the CARB leadership team in just the past week. I'm proud of our team's dedication and hard work here at Workhorse. In just over the two years since taking over the company, we have They have final vehicle assembly up and running for not one but three new product lines, the W4C cab chassis, the W750 and W56 step vans. Anyone who understands the automotive industry realizes how tough and costly it is to design, test, and launch new products, and it typically takes at least three to five years. The Workhorse team did it in less than 22 months. At the same time, we now have two sellable drones in the market and are speaking to a greater number of prospective customers on the aero side of the business. Workhorse is now poised to begin our growth phase, and it's a testament to the incredibly talented and, again, dedicated team we have here today. With that, let me go into some of our key accomplishments for the quarter. On slide five. Our most significant update across our commercial vehicles in the third quarter was launching production after completing FMVSS durability and validation testing for the W56, our third product vehicle line of the year and the lifeblood of the company. I won't be the first CEO of an EVOEM to say this since Elon Musk has already made the observation, but manufacturing truly is somewhere between 100 to a thousand times harder than making a prototype or trade show vehicle. At Elon, we cannot emphasize enough how hard production is relative to design. And at Workhorse, we have now launched full manufacturing of the W56 from start to finish in 22 months again. We also increased our production rate to four W750 step vans a week and shipped multiple configured demonstration W4CC vehicles to potential customers. We made continued progress expanding our dealer network and commercial footprint, signing up two new certified dealers which includes stocking orders to be filled over the next 12 months. During Q3, we received IRS approval as a qualified manufacturer for the commercial clean vehicle credit, which provides a workhorse customer's eligibility to receive up to $40,000 in federal tax credit per vehicle for deliveries of all workhorse vehicles in 2023 and beyond. We added talented sales staff with experience in commercial fleet and governmental sales, custom bodybuilding and upfitting experience, as well as beefed up our regional depth out in California. Our corporate support and IT systems are working across all functions with the completion of our phase one ERP project, a key back office enabler as we move from engineering and testing into production and sales. Our lean manufacturing practices at the plant have been reinforced, and we are working across our extended supply chain. The bottom line is that we now have the people, products, processes, support systems, and business partners in place to grow into a viable commercial EV OEM. At Stables, we continue to transition and grow the EV fleet and expand our customer delivery responsibilities. Peak season starts later this week on November 18th, and we are ready to meet the surge in demand with a proven, capable EV fleet, which our drivers find to be much more reliable and much more cost-effective than the old ICE fleet we acquired back in 2022. The Arrow business continues to generate revenue and has now sold units to both UPS Flight Forward and Valkyrie. Two more USDA grants were received in the quarter. And just to put those grants in perspective, that revenue impact is akin to selling more than 60 drones. So it's meaningful and important business for us here at Arrow. We completed the administration of the class action lawsuit and received approval from the shareholder base for an increase in share authorization by 200 million shares. At Union City, we completed installation and placed into service an in-house paint system representing the last major near-term capital investment required for the facility until sometime in second half 24. Finally, while there is strong demand for their vehicles, the team at Tropos ran some significant operational and financial headwinds during Q3. As a result, we are working with the management team, their creditors, and partners to find a successful path forward recapitalization of the business. We expect Tropos to find a path forward during Q4. Moving to slide six, let me talk a bit more about HPIP. Our ability to deliver W4CCs and W750s during 2023 was severely impacted by the lack of HPIP voucher availability in California. This was especially impactful during Q3 and a large portion of Q4. As I mentioned earlier, I am happy to report that we have successfully resolved this issue, and as of November 8, CARB established a first-of-its-kind program for intermediate vehicle manufacturers with Workhorse. As a result, we now have our own voucher pool here at Workhorse, a huge enabler for commercial EV sales. Based on our months of efforts with them, And thanks to the problem-solving efforts of the CARB Air Resources Board team, we broke through a major regulatory obstacle Workhorse was facing in the number one EV market in the United States called California. As further evidence of the importance of this breakthrough, we added a new certified dealer in California during the last week who was awaiting the CARB voucher decision. This dealer committed to a stocking order and is working to secure a large fleet order using the family of Workhorse vehicles we can provide him. Turning to slide seven, let me provide a few updates on our Class IV vehicle programs. For the W4CC and W750, we have seen several positive market signals. First, we have our first repeat orders from dealers in both New York and California, which indicates increasing market demand for these products. Importantly, we ship multiple demonstration vehicles to potential customers, including both box and reefer trucks in these two states. These are important opportunities for us out in the market. We also completed a demonstration test with the city government agencies in California and on two 30-day delivery routes for a major office supply company on the East Coast. All three demos were successful, and we await customer decisions on future orders. We have W4CC trucks with box bodies out for further demonstration testing with a previous workhorse customer, which plans to convert 100% of their fleet to EV vehicles by 2025 to 2026. We are now capable of producing one W750 per day for four per week out of the plant. In addition to the demos I mentioned and those in service at Stables, we have several other demo and fleet opportunities we are pursuing with large last mile parcel customers in both Q4 this year and early Q1 next year. I also want to make clear that all of our vehicles across our commercial vehicle product roadmap are profitable at the contribution margin level. which stands in stark contrast to the legacy workhorse vehicles. As we continue to scale production and grow the sales of our trucks, we expect to do so profitably. Moving to slide eight, as I mentioned during the quarter, we began production of both the W56 strip chassis and step van after successfully completing all FMVSS durability and validation testing, as well as supplier part PPAP certification. We anticipate final HVIP certification through CARB to be completed in Q4 2023 for the W56. Drilling down a bit, we completed over 250,000 miles on the Navistar test track, which I had mentioned previously is a real, real hard test. Again, we have TPAP all the individual parts on this vehicle. What this means in practical terms is that we can now deliver automotive OEM level quality products to our customers. something we think will differentiate us in the marketplace against other startups. We can provide either a strip chassis or a complete step van vehicle. We can paint them on site. We will be able to produce up to two step vans per day by the end of Q4 and ramp up to five to eight units per day in the first quarter of 2024. Put another way, our lead times for complete step van vehicles is basically 120 days compared to nine to 12 months of source from other parties based on what we're hearing from fleets we're calling on. I believe that is a real competitive differentiator for Workhorse in the step van segment, a huge paradigm shift from what has been traditionally a capacity-restricted duopoly situation for more than three decades. As 17 U.S. states move to adopt the new CARB clean fleet mandates, Workhorse is well-positioned to earn market share in the step van segment. On slide nine, I wanted to share a picture of one of our first production step vans out in the field. We have initial production demonstration units already operating in California with multiple partners, and we have received extremely positive feedback on the performance on real-world tests, last-mile routes up to 125 miles. We're able to put that truck together, including custom-upfit packages, literally in six weeks from the time we discuss the concept to delivery with this potential California out in California. We don't think there's any other customer who can do such things. a job. Importantly, we have strong customer interest in the W56, and we are confident in our ability to secure firm orders, purchase orders in the fourth quarter and beyond. The W56 will be a major driver of our growth and success moving forward as we capitalize on the transition to commercial EVs. As a reminder, we have the capacity to build up to 5,000 W56 units per year at our Union City, Indiana plant on one shift which would generate more than a billion dollars of revenue. On slide 10, we continue to successfully deliver last mile packages for FedEx ground and incrementally grow route assignments in our stables operations. We electrified about 70% of the Lebanon Ohio based fleet and are continuing to review options to partner with operators in incentive based states. We're also looking at several other approaches to get more trucks in the field. We have plans to add two W56 vehicles to our Ohio-based fleet in Q4 of 2023. And we are in the first stages of data analysis on our ICE to EV transition white paper. I will say that through this initiative, we are gaining tremendous real-world experience and, more importantly, credibility with our future customers to better serve independent contractor fleet operators as they make the transition to EVs. On slide 11, our aerospace team achieved notable milestones during the third quarter. We began drone assembly in our Mason, Ohio facility and sold and delivered three additional drone aircraft to customers. Workhorse also advanced our efforts to receive FAA certificate approval for the horsefly. We entered the FAA process on the horsefly on UPS Flight Forward's FAA Part 135 drone airline certificate. Our aero business is working closely with the team at UPS Flight Forward and the FAA and plans to have everything necessary to have the horsefly approved for FAA Part 135 operations by the end of 2023. This is an important next step in bringing the horsefly to market and reflects UPS Flight Forward's recognition that our drones are safe, reliable, and capable. We also received two additional USDA grants in the third quarter, totaling about $1.1 million in additional funding. We are also exploring additional applications for both the Horsefly and Falcon drones with the USDA leadership team. That being said, as you likely saw in our press release this morning, in connection with our earnings announcement, the company has initiated a review of strategic alternatives for the aero business. We are proud of the advancements we've made across our aero business. We've built and begun operating our manufacturing facilities, and our market-leading safe and reliable drones are drawing customer interest both commercially and through government agencies both here in the United States and overseas. With this foundation now in place, we determined that beginning this strategic review now is prudent to ensure we are unlocking the most value for Workhorse shareholders while best positioning our Arrow business to capture and fund future growth opportunities. Looking ahead, we will evaluate a broad range of options for the Arrow business, including a potential sale of the business, strategic partnerships, or the continued execution of our strategic plans for Arrow within Workhorse. We are still in the very early stages of this review process, and we will provide updates if and when we have news to share. With that, I'll now turn the call over to Bob to discuss our financial results for the quarter. Thanks, Rick.