CINCINNATI, March 01, 2023 (GLOBE NEWSWIRE) -- Workhorse Group Inc. (Nasdaq: WKHS ) (“Workhorse” or “the Company”), an American technology company with a vision to pioneer the transition to zero emission commercial vehicles, today reported financial results for the fourth quarter and full year ended December 31, 2022.

Management Commentary

“This past year was critical for Workhorse, as we took decisive actions to position the Company for the next phase of growth and value creation,” said Workhorse CEO Rick Dauch. “During the fourth quarter we executed on our commercial vehicle product roadmaps, advanced our Aero business and Stables & Stalls initiative, completed building out our talented leadership team, resolved key legacy issues and strengthened our financial position.”

“Looking ahead, we have developed a clear and executable product roadmap and are encouraged by the progress we are making. We are on track to ramp up production and deliveries across our W4 CC, W750 and W56 products in 2023. We’re confident in our corporate trajectory and remain well-positioned to win in the commercial EV market with safe, reliable and durable products that create value for our customers, communities, and shareholders.”

Fourth Quarter 2022 and Recent Operational Highlights

Workhorse delivered on its stated priorities by executing on its product roadmaps and strengthening its financial and operational position in the following key areas:

• As showcased at Workhorse’s Analyst Day in December, the Union City, Indiana plant has been completely transformed into a world-class manufacturing complex. The plant continues to ramp up production of the W4 CC in Q1 2023 and is on track to begin production of the W750 in Q2 2023 and the W56 in Q3 2023.

• Began shipping Tropos vehicles, which were assembled in Workhorse’s Union City plant, as part of a three-year contract manufacturing agreement with Tropos Technologies. Volumes for final assembly in the U.S. market are expected to reach about 2,000 units per year once ramp-up is complete.

• Concluded the facilities improvement efforts in the Wixom, Michigan engineering center and is near completion of the testing center in Sharonville, Ohio. The Company is in the process of installing production lines for its drones at its engineering, technical design and production facility in Mason, Ohio.

• After thorough engineering review, durability testing and careful consideration, the Company decided to discontinue the C1000 program, reallocating engineering and supply chain resources towards the development and production of its other products. Workhorse expects previously built C1000 units to be decommissioned and disassembled by the end of Q1 2023.

• As previously disclosed, the Company resolved legacy legal and regulatory issues as it entered into proposed settlements to resolve the previously disclosed securities class action lawsuit and related shareholder derivative actions. Workhorse also received notice from the Securities and Exchange Commission (SEC) that the previously disclosed investigation of the Company has concluded, and the SEC does not intend to recommend any enforcement action against the Company.
  

Executing Strategic Commercial Vehicle Product Roadmap

Workhorse is executing against its strategic product roadmap for its electric vehicle delivery offerings.

• W4 CC/W750: Workhorse is continuing to ramp up production and delivery of its W4 CC vehicles. After working to resolve shipping delays, the Company produced and delivered 23 W4 CC’s during Q4 2022. W750 pilot builds have taken place in Q1 2023, and the Company plans to start production in Q2 2023.

• W56: The W56 program remains on track for start of production in Q3 2023. The Company plans to showcase the new step-van vehicle at the upcoming NTEA Work Truck Show® in Indianapolis, Indiana where prospective customers can see the production intent vehicle first-hand.

• WNext (formerly W34): The Company is using its previous Class 3 and Class 4 vehicle field experience to develop a next-generation vehicle with an accessible low floor frame, improved ride and handling, efficient lightweight systems and advanced safety technology. The Company will focus on prototype design, test and build in 2023-24 with production planned in 2025.

• Stables & Stalls: Workhorse’s Stable & Stalls is a fleet electrification initiative that provides services and charging infrastructure to support small fleet operators with EV powered fleets. The Company successfully managed peak holiday season and has been using its first EV W750 step van actively executing for FedEx on multiple delivery routes in Ohio. Workhorse expects to fully electrify the Lebanon fleet by the end of Q2 2023 and is currently exploring opportunities to establish a second operational location in an incentive supported state.
  

Progress in Aerospace Commercialization

Workhorse continues to advance its drone technology development and achieve important milestones including:

• Conducted demonstrations of simultaneous package deliveries by multiple drone aircraft to two prospective last-mile delivery clients.

• Successfully field tested the humanitarian and logistical operations (“HALO”) drone internationally.

• Partnered with the U.S. Department of Agriculture and secured new Federal and State level grants, most recently adding Michigan to its growing grant list. Actively exploring new opportunities for collaboration with Federal and State government agencies.

• Currently providing operational support to government programs in North Dakota, Arkansas, and Mississippi.
  

Fourth Quarter 2022 Financial Results

Sales, net of returns and allowances, for the fourth quarter of 2022 were $3.4 million compared to $(2.0) million in the same period last year. The increase was primarily due to increased W4 CC vehicle sales.

Cost of sales decreased to $21.2 million from $99.9 million in the same period last year as the Company recorded several non-cash charges in Q4 2022 including $12.8 million in additional inventory reserves and disposal costs for the discontinued C1000 program compared to the $94.3 million in Q4 2021.

Selling, general and administrative (“SG&A”) expenses decreased to $13.5 million from $15.7 million in the same period last year. The decrease in SG&A expenses was primarily driven by contract termination costs recorded in 2021.

Research and development (“R&D”) expenses increased to $8.0 million compared to $2.8 million in the same period last year. The increase in R&D expenses was primarily due to increased engineering staff related to the design and sourcing for the Company’s new products, including the W4 CC, W750, W56 and two drone product lines.

Net interest income was $0.5 million compared to a net interest expense of $35.7 million in the same period last year. The change in interest income was primarily driven by the exchange of the convertible notes concluded earlier in 2022.

Net loss was $38.7 million compared to $156.1 million in the same period last year. Loss from operations for the fourth quarter was $39.3 million compared to $120.4 million in the same period last year.

As of December 31, 2022, the Company had $99.3 million in cash and cash equivalents.

Full Year 2022 Financial Results

Sales, net of returns and allowances, for the full year 2022 were $5.0 million compared to ($0.9) million in 2021. The increase in sales was primarily due to an increase in sales volume in 2022 compared to sales, net of returns and allowances recorded in 2021 in connection with the recall of C1000 vehicles announced in the third quarter of 2021.

Cost of sales for the full year 2022 decreased by $94.8 million to $37.7 million compared to $132.5 million in 2021. The decrease was primarily due to the shift in production to new vehicle platforms at lower volumes compared to the C1000 program in production in 2021. The C1000 program incurred a $19.5 million increase in the inventory reserve and prepaid purchases reserve in 2022, largely attributable to the discontinuation of the C1000 program, compared to a $105.7 million reserve recognized in 2021.