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Operator
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.
Dan
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.
Sherry
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.
Rick
Let's turn to slide 12 to discuss our third quarter financial results. Sales, net of returns, and allowances for the third quarter of 2023 were recorded at $3 million compared to $1.5 million in the same period last year. The increase in sales was primarily a result of the reversal of a sales allowance in the current period related to the sale of W4CC vehicles in the second quarter of 2023. Cost of sales decreased to $6.6 million for the third quarter of 2023 compared to $9.5 million in the same period last year. The decrease was primarily due to a $2.9 million reduction in inventory reserves and adjustments in the same period a year ago as a result of the disposition of C-series inventory. Lower sales volume in the current period reduced costs by $1 million, which was offset by a $1.2 million increase in employee compensation and related expenses as the company continued to expand its Union City, Indiana workforce to support future vehicle production. Selling general and administrative expenses for the third quarter of 2023 decreased to $11.8 million compared to $34.8 million in the same period last year. The decrease was primarily driven by a $23.9 million reduction in expenses associated with with the settlement of securities and shareholder-driven litigation. This was $20 million in a non-cash stock settlement and about $3.9 million in legal fees. Employee compensation-related expenses, including non-cash stock-based compensation expense, decreased by $0.4 million compared to the prior period, which was offset by a $0.8 million increase in professional services and other IT-related expenses. Research and development expenses for the third quarter of 2023 decreased to $5.8 million compared to $6.1 million in the same period last year. The decrease was driven by a $0.9 million reduction in consulting expenses partially offset by a $0.5 million increase in employee compensation related expenses as we move to production in the W56. Net interest income in the third quarter of 2023 was $0.4 million compared to zero interest expense in the same period last year. Net interest income in the current period was driven by interest earned on cash in the company's money market investment account. Other loss for the third quarter of 2023 was $10 million as compared to $13.4 million in other income for the same period last year. Other loss in the current period represents the impairment of the company's investment in Tropos resulting from the economic conditions and uncertainties that have significantly affected Tropos' performance and financial position. Other income in the prior period was recognized in connection with the sale of C-Series inventory that was formerly written down to zero cost through inventory reserves. Net loss for the third quarter of 2023 was $30.6 million compared to a net loss of $35.4 million in the same period last year. Turning to slide 13 to discuss our balance sheet, as of September 30, 2023, we have approximately $38.9 million in cash. Our cash burn during the quarter was down quarter over quarter as we primarily decreased spending on inventory, and we expect this trend to continue through Q4 and into 2024. Importantly, we are taking major steps to strengthen our financial position and focus on reducing expenses to ensure we have the runway to execute our strategic plans. We are in advanced discussions with third parties to obtain additional financing to support our growth plans. We are also evaluating other options to strengthen our liquidity position. Our 10Q as of September 30, 2023 includes going concern language as a result of our slower than anticipated sales ramp and HVIP availability. As I mentioned, we have a strong cash position of $38.9 million to fulfill our obligations and continue to operate. We are taking steps to remedy the going concern, including efforts to drive revenue growth, obtain additional financing and liquidity. We will continue to evaluate the best path forward and have several options to continue to fund the next phase of production and growth. Turning to slide 14, we are providing an update to our 2023 guidance to reflect the HVIP voucher situation that significantly impacted our Q3 results and full year sales. We now expect to generate between 10 and 15 million in revenue this year. The resolution of the HVIP voucher is positive news and provides momentum for us as we work through the remainder of 2023. I'll now turn the call back to Rick to wrap up the call.
Sherry
Thanks, Bob. Let me briefly discuss our Q4 priorities. which are outlined on slide 15. I can easily summarize these very quickly. Our largest single Q4 priority is straightforward, to build and sell trucks and drones. That's it, build and sell trucks and drones, plain and simple. Additionally, as Bob mentioned, we will focus on strengthening our financial position and reviewing options to enhance our liquidity position so we can achieve our future growth plans. Before opening the line to questions, let me mention a few final thoughts. Being true pioneers in an industry going through a generational technology change is not easy. It's tough, it's hard, and sometimes it's thankless work. No one in America could accurately forecast how fast or how slow the transition to commercial EVs will occur. One thing I do know is that we now have the people, the products, the manufacturing processes, the qualified suppliers, the experienced distribution partners in place to be ready when that transition does occur. Every fleet customer that has visited Union City and driven our truck has asked for a demo, and every demo we have executed in the past 90 days has been successful. The foundations are in place at Workhorse for us to emerge as one of the survivors and winners in the commercial EV industry. We're now ready to open the call for your questions. Operator, please provide the appropriate instructions.
Operator
Thank you. If you would like to ask a question, please 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. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Greg Lewis with BTIG. Please proceed.
Greg Lewis
Yeah, hi. Thank you, and good morning, and thanks for taking my questions. Rick, I wanted to touch a little bit more on... HVIP, you know, clearly, you know, congratulations on getting those final approvals. You know, as we think about it, I guess, you know, looking at Q3, there were a handful of trucks sold. How much of those were related to HVIP? You mean the lack of sales? Well, I mean, what, you had 700,000. I mean, I'm thinking that's five to six or seven trucks.
Sherry
Yeah, a couple of those trucks went out to some of the new dealers we have as part of our stocking orders. We really are blocked in California. As everybody knows right now, the cost of an electric truck is much higher than an ICE truck, mostly by the batteries. The government has put in place, both at the state level and now at the federal level, some significant incentives to help move into the EV segment. Without those incentives, you aren't really going to sell too many trucks. And I think we are seeing some, not resistance, But I'll say there's some wariness on the part of the fleets. Are these EV trucks really going to be capable of handling the duty cycles and the payloads and the ranges that they require on a day-to-day basis? I can tell you, based on the demos our company has done, side-by-side against others, we're convinced, and so are some of the customers, that our trucks can do the job. I don't know if they can say that about some of the other guys. Thank you for that. I'm not going to spare my name, any of the competitors, but EV trucks that are out there, some of the initial prototypes, especially from some of the startups, are having some struggles is what I'd say.
Greg Lewis
Yeah, makes sense. And then so as we think about it, you mentioned the dealer in California, realizing we didn't disclose any sense for the size of that dealer as we think about their track record, maybe age. You know, in terms of size, you know, any kind of color you can give us around that dealer.
Sherry
Yeah, I can give you a little color. I won't give you the name. I'll just tell you it's in Southern California. It is a one brand commercial truck only dealer. That current brand he carries will not have a viable EV product until 25 or 26. And he basically said to us, I'm dead in the water with regards to the EVs in California. And I really want to partner with you guys. But I can't do that if you're going to give me trucks without vouchers. And so he waited. Very smart, I'd say, on his part. And now he's signed up. We're going to get him some stocking orders yet this year. And he's already working on a deal that's more than 40 or 50 vehicles.
Greg Lewis
Okay, perfect. Super helpful. Thank you very much.
Operator
As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question is from Chris Southert. With B. Reilly Securities, please proceed.
Chris Southert
Hey, guys. Thanks for taking my question. I was just curious on the review of the aerospace. Can you give us a sense of what, like, the, you know, cash burn from that, you know, segment is today? Just wanted to kind of frame, you know, if we're looking at, like, strategic alternatives and reviewing that business, like, what, you know, the impact on the financials is from that segment?
Rick
Currently, we're spending about $700,000 a month in Arrow, down from, you know, previous in the year, but that's kind of where we are right now.
Chris Southert
Got it. Okay. And then, you know, on the overall kind of CapEx trajectory, how should we think about, you know, where we are as far as kind of readying the plant for scaling? Is there kind of additional
Rick
know capex that we really need to kind of focus on for the next you know quarter a couple quarters here or we you know pretty pretty set on that front yeah i think uh kind of split that in two i think for for uh you know the rest of this year if you look at our capex through the uh first three quarters we'll we'll be down in the fourth quarter as we're through most of those projects and really uh from the plant perspective um we've got the capacity to scale without A lot of CapEx will have the typical maintenance type things going into next year. But the heavy lifting is out of the way now with the finalization of our paint line.
Sherry
Yeah, I'll jump in there, Chris. So W4CC and W750, we have the assembly lines fully tooled up. We're waiting just a couple minor manufacturing devices to put on the panels on the top of the W56. Minimal money that will be spent this year. W56, we just got the AGVs in this week. I'm sure we owe a last payment to them once they're run off. And we're just finalizing the paint shop runoff. So we have a little bit of payment there. Other than that, we're set. 5,000 W56 a year. The W4CC, probably 800 up to 1,000 trucks a year, depending on the demand. The only money we really need for CapEx will be supplier tooling as we go into what we call the W56 cab chassis version, which will launch sometime next year. So capital has been spent. Plants have been reconditioned. Test track's in place. Warehouse has been refurbished. Paint shop's in. Everything we have is in place to be a billion-dollar-plus OEM.
Chris Southert
That's great. And maybe just last one, you talked about, you know, being prepared to scale the business for profitable growth 2024. Can you, you know, are we at a point here, you think, where you have a sense as to kind of what that break-even, you know, revenue level would look like and, you know, timing around that? Just, you know, any kind of clarity you can provide at this stage would be, I think, helpful for folks.
Rick
Sure. Well, first of all, you know, we're actually – just kind of getting into the budgeting process, so we don't really have answers there just yet. As I said, you know, on I think a previous call, our positive gross margin is around 300 trucks a quarter, 100 trucks a month. We've not gotten into full cash flow, but you can probably do some math from there. But we think 300 is a magical number for us to get to step one here, and that's positive gross margin.
Chris Southert
Thanks a lot. I'll open the queue.
Operator
Our next question is from Craig Irwin with Ross MKM. Please proceed.
Craig Irwin
Good morning, and thanks for taking my questions. So this past year, as you were planning for sort of a higher revenue runway, there was a lot of work done developing customers and supporting those customers in procurement of HVAC vouchers, some of these vouchers out of New York, New Jersey, Massachusetts, it kind of means some of the heavy lift for growth over the next year has probably been addressed. Can you maybe talk to us how you feel about the pipeline right now as far as deliveries once production is there and these trucks are fully certified to be you know, handed over to customers that have been working to receive them. And, you know, is there any detail that you can share with us on the vouchers or how you feel about the eligibility of vouchers as these final certifications come through?
Sherry
Yeah, let me, our priorities are, we did all the brand new truck in less than 22 months. So we're still working through stabilizing suppliers. stabilizing our own assembly processes and launching the paint plant. So we have some work to do still to get towards the run rates and start picking up the pace. I'd almost say, Craig, we're priming the pump right now. That's internal, right? And we think we have that under control pretty well. When it comes to pipeline, we're seeing various feedback from the marketplace. Obviously, the CARB mandates for clean fleets takes effect January 1st. 2024 in California. And we're seeing a flurry of RFP activity out in California, primarily through government-funded organizations. So you're talking the state level, the city level, the county level of the municipalities, right? So that's an opportunity for us. That's why it was so important for us to get these HVIP credits and vouchers out in California, okay? We did two demos with fleets. One fleet is talking about buying 40 to 50 EVs, and one is talking about 30 or 40 EVs, but only if the car mandate stays in place on January 1st. You tell me, I don't know. There's a legal appeal against the California mandate by the California Trucking Association that should be heard in the next 30 or 60 days. My experience growing up in the auto industry for almost 50 years now, I've seen carb lose battles, but I've never seen carb lose the long war, okay? So I think there's a move going forward. We've talked to some of the biggest fleet operators in California. You name it. FedEx, UPS, Ryder, Penske, others, Cintas. And guess what? They're all trying to figure out how fast they need to move to EV and at what pace, right? Similar stories over in New York City. I think we're seeing strong interest in New York City, New Jersey area, the metro New York City area, I'll call it. That's where we're doing our reefer demos. We have a reefer out there. We worked with Arctic Chill to put a reefer on the back of the W4CC. It's out running its route right now. That route is 20 to 30 miles only, but it makes over 100 stops a day at each restaurant as it delivers food, dairy products, etc., So we think that's an opportunity. One of the customers that I inherited when we got here, which we ended up buying the trucks back right away, because all five trucks failed, has told us they are 100% committed to go to EVs in 24, 25, 26. They want class four trucks that can carry 5,000 pounds. That's exactly what the W750 and the W4CC can do. And so we have those trucks out there being tested. I'm confident. and we'll finish those demos like every other demo successfully, and we hope to win those orders. But I can't tell you if that's going to be a 100-truck order or 10 trucks a quarter. That's kind of the wild card right now here as we fight our way into this transition. Does that help?
Craig Irwin
That's very helpful. I definitely appreciate that. So a key part of the value proposition to all of these customers is the reduced maintenance. And previously the company was saying there was about a 65% reduction in maintenance and operating costs for these trucks, for the workhorse trucks. You know, your designs have evolved. I mean, I guess they've probably got more efficient, more reliable. But can you maybe quantify for us, you know, what the customers are looking at? Is it still roughly, you know, two-thirds reduction in maintenance and operating costs? And, you know, how does this resonate with this customer crowd?
Sherry
Yeah, that's a great question. I think we'll have better, hard, factual data at the end of this peak season here in the fourth quarter that we'll be able to share with you guys on our end of the year earnings call early next year. I can tell you right now at Stables and Stalls, in a fleet of about 10 vehicles, we spend close to $30,000 a month in fuel. 70% of our trucks are now electric, and so we're not spending nearly that much on fuel. We've had zero repairs of any of our W750s for any meaningful powertrain parts. We have had some damages on the side or on the bumpers when our drivers hit things and that kind of stuff like that. So I do think the numbers are going to be somewhere north of 60% or 70% in terms of TCO savings. That's our estimate today. We'll be able to actually document it. And I want to reiterate, when we talk to these customers out, like we're out in California, When we could tell them we have our own fleet of trucks and we're making the conversion from ICE to EVs, their lights light up. The one fleet I was at, the average age of the truck is 15. They keep their trucks 15 to 20 years. The average age is around seven. And we talked, we had a laugh over a cup of coffee about, you know, failed transmissions, brake jobs, drive shafts, axle repairs, engines, all those kind of things like that. All that goes away with the EVs, right? So.
Craig Irwin
Understood. Well, congrats on the progress and thanks again for taking my questions.
Sherry
Great, thanks.
Operator
We have reached the end of our question and answer session. I would like to turn the call back over to management for closing comments.
Sherry
I appreciate your support. It's not easy, this transition. It's a little bit hairy sometimes. As Bob says, we're well poised from an operational standpoint. We need to go sell trucks and drones. and we got a look at opportunities to improve the length of our runway so we can land this ship successfully here at Workhorse. We appreciate it. Look forward to seeing you out on the road. Have a great day.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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