Q4 2023 Workhorse Group Inc Earnings Call
Operator: Ladies and gentlemen, greetings and welcome to Workhorse Group's fourth quarter 2023 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. Mr. March, you may begin.
Ladies and gentlemen, greetings and welcome to Workhorse group's fourth quarter 2023 investor call.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Workhorses group's Vice President of corporate development and Communications Stan March Sir you may begin.
Stan March: Thank you, Donna. Good afternoon, and thanks to all of you for joining us for the fourth quarter and full year 2023 results call. Before we begin, I'd like to note that we posted our results for the fourth quarter and full year that ended December 31st, 2023 via press release, as well as filed our 2023 10-K. You can find both these documents, as well as the accompanying presentation that will form the basis of today's conversation, in the Investor Relations section of the website. We will track it along with the presentation during the call.
Thank you Donna good afternoon, and thanks to all of you for joining us for the fourth quarter and full year 2023 results call before we begin I'd like to note that we posted our results for the fourth quarter and full year ended December 31, 2023 press.
Press release as well as filed our 2023 10-K, you can find both of these documents as well as the accompanying presentation that will form the basis of today's conversation at the Investor Relations section of the website, we're tracking along with the presentation during the call.
Stan March: Joining me on today's call are Rick Dauch, our CEO, and Bob Ginnan, our CFO. After my opening remarks on slide three, you'll see the agenda for today's call. I'll turn it over to Rick for an update on our strategic and operational priorities throughout 2023 and during the fourth quarter. Then Bob will walk us through the financial results for the fourth quarter and full year and provide our outlook for 2024. Then we'll take any questions.
Joining me on today's call are ripped out our CEO and Bob can add our CFO.
After my opening remarks on slide three you'll see it.
You'll see the agenda for today's call I'll turn it over to Rick for an update on our strategic and operational priorities throughout 2023 and during the fourth quarter.
Bob will walk us through the financial results for the fourth quarter and full year and provide our outlook for 2024, and then we'll take any questions.
Stan March: On slide four, you'll see our forward-looking statement. As you know, some of the comments that we've 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, which was filed today, as well as in today's press release. And with that, I'll now turn the call over to Rick. Thanks, Stan. Good afternoon, everyone.
On slide four you'll see our forward looking statement as you know some of the comments that we've made today are forward looking and therefore subject to certain provisions and as a result are subject to risks and uncertainties. You can find the full disclaimer statement and our 10-K, which was filed today as well as in today's press release and with that I'll now turn the call over to Rick.
Thanks, Dan and good afternoon, everyone. We appreciate you taking the time to call in today and thank you for your continued support of workhorse.
Richard F. Dauch: We appreciate you taking the time to call in today, and thank you for your continued support of Workhorse. Today, we're going to discuss our fourth quarter and full year 2023 results and also cover the actions we're taking to position the company for success. During the year, we rolled out our first W5-6 step van, signed up our first W5-6 fleet customers, and increased our production capabilities for our W4CC and W750 vehicles. We also expanded our commercial network, adding key dealers and partners in multiple states.
Okay, we're going to discuss our fourth quarter and full year 2023 results and also cover the actions, we're taking to position the company for success.
During the year, we rolled out our first W. Five six step van signed up our first W. Five six fleet customers and increase our production capabilities for our W. For C. C N W 50 vehicles.
We also expanded our commercial network, adding key dealers and partners in multiple states.
Richard F. Dauch: At the same time, we've taken actions to strengthen our financial position so that we can continue delivering on our commitment to advancing our commercial EV product roadmap, building demand, and selling our truck. As we disclosed today in our 10-K, we are in the process of completing negotiations on a financing transaction that, along with our pending sale-leaseback transaction and aggressive cost-cutting actions we are taking, will position our business to have the financial runway necessary to execute on our business plan. As part of the cost-saving actions, we are reducing headcount across the organization, deferring executive compensation, and suspending drone design and manufacturing in our aero business, which I will discuss in more detail later in my comment.
At the same time, we've taken actions to strengthen our financial position. So that we can continue delivering on our commitment to advancing our commercial EV product roadmap building demand and selling our trucks.
As we disclosed today in our 10-K, we are in the process of completing negotiations on a financing transaction that along with our pending sale lease back transaction and aggressive cost cutting actions. We are taking will position our business to have the financial runway necessary to execute on our business plans.
As part of the cost saving actions, we are reducing head count across the organization, the foreign executive compensation and suspending drilling design and manufacturing in our Aero business, which I will discuss in more detail later in my comments.
Richard F. Dauch: From a manufacturing and customer service demand perspective, we have built strong capabilities. We had initial successes last year and this year and have had key demonstrations with several large last-mile fleet operators, as well as state and municipal fleets, which are either already underway or plan to begin in early 2024. We'll talk about all of this in detail in a moment, but I want to pause and acknowledge that I'm extremely proud of the hard work and dedication of our outstanding team here at Workhorse. Our team has overcome every obstacle placed in our path, and I know that every one of us is deeply and passionately committed to success. I'm incredibly proud of the Workhorse team and grateful for the contributions of all of our employees, including those whose jobs are impacted by the difficult but necessary actions we are taking to reduce our operating costs. Moving to slide five.
From a manufacturing and customer service demand perspective, we have built strong capabilities.
We have had initial successes last year and this year and that's a key demonstrations with several large last mile fleet operators as well as state and municipal fleets, which are either already underway or planned to begin in early 2024.
We'll talk about all of this in detail in a moment, but I want to pause and acknowledge that I am extremely proud of the hard work and dedication of our outstanding team here at workhorse.
Our team has overcome every optical place in our path and I know that every one of us is deeply and passionately committed to success.
Really proud of the workhorse team and great for those for the contributions of all of our employees, including those whose jobs are impacted by the difficult but necessary actions, we are taking to reduce our operating costs.
Moving to slide five let me take a few minutes to address the state of the commercial EV industry from our perspective.
Richard F. Dauch: Let me take a few minutes to address the state of the commercial EV industry from our perspective. The Workhorse leadership and sales team spent the majority of last week at the industry trade show, the NTA trade show in Indianapolis. Every OEM and the major upfitters proudly display their future zero emission Class 3 to 7 commercial vehicle product lineup. There is no question that the transition to a new generation of powertrain technology is coming. The question is really, when will it come?
The workhorse leadership and sales team spent the majority of last week at the industry trade show the MTA trade show in Indianapolis.
OEM and the major update is proud to display their future zero emission class III to seven commercial vehicle product lineups.
There's no question that the transition to a new generation of powertrain technology is coming.
Question is really when will it come.
Richard F. Dauch: The new CARB clean fleet mandate took effect on January 1st in California, but it is not yet being enforced. The commercial truck industry is uncertain how to proceed with the transition to electric vehicles. Most fleets, both big and small, are reluctant to make large investments in the necessary infrastructure to make the shift to either natural gas or electric-powered vehicles if the CARB mandates might get delayed or revised.
The new car fleet clean fleet mandate took effect on January 1st out in California, but it is not yet being enforced.
The commercial truck industry is uncertain on how to proceed with the transition to Evs.
Mostly both big and small are reluctant to make large investments on the necessary infrastructure to make the shift to either natural gas or electric power vehicles.
If the carb mandates might get delayed or revised.
Richard F. Dauch: Several OEMs are hedging their product development investments and supplier investment plans for EVs, pushing out some timing. Here at Workhorse, after two and a half years of back-breaking work, we feel that we are on the precipice of success, that we can, and we will find a path forward. We have the products, supplier and dealer partners, engineering capabilities, business systems, and manufacturing processes in place to emerge as a winner in the class four to six segment. But that only happens if fleet customers, both large and small, start buying our products in 2024. In 2023, we continue to advance our product roadmap, all while navigating and solving challenges, both internal and external to the company. Progress in this nascent commercial EV industry is not linear, and we know we will need to continue to address challenges as they pop up.
Several Oems are hedging their product development investments and supplier investment plans for evs pushing out some tiny.
Here at workhorse after two and a half years of back breaking work, we feel that we're on the precipice of success.
Yeah, we can and we will find a path forward.
We have the products supplier and dealer partners engineering capabilities business systems and manufacturing processes in place to emerge as a winner in the class four to six segment.
But that only happens if fleet customers, both large and small start buying our products in 2024.
In 2023, we continue to advance our product roadmap, all while navigating and solving challenges both internal and external to the company.
Progress in this nascent commercial EV industry is not linear and we know we will need to continue to address challenges as they pop up.
Richard F. Dauch: And while our results for the year were affected by issues that slowed us down, we never stopped driving forward to create a viable and profitable EV OEM company. During the year, we rolled out our first W5-6 step van, signed up our first fleet customers, and established our production capabilities for the W4CC and W750 vehicles. We also expanded our commercial dealer network, adding new dealers and upfitting partners in multiple states. In our aerial business, we continue to expand our relationship with key government agencies and partners.
And while our results for the year were affected by issues that slowed us down we never stopped driving forward to create a viable and profitable EV OEM company.
During the year, we rolled out our first 75 six step van.
Signed up our first fleet customers and establish our production capabilities for the W. Foresee at W 750 vehicles.
We also expanded our commercial dealer network, adding new dealers and not bidding partners in multiple states.
Now our Aero business, we continue to expand our relationship with key government agencies and partners.
Richard F. Dauch: Let's review the key accomplishments and successes we achieved at Workhorse in 2023. By then, we will have four distinct commercial EV products in production. We have four distinct commercial EV products in production. We have received important HVIP certification for both our Class 4 and our Class 5-6 vehicles. We secured initial fleet orders for the W5-6 step van and strip chassis, and we organically grew the Stables business. Additionally, we completed the overhaul of our Union City Manufacturing Complex.
Let's review the key accomplishments and successes, we achieved that workhorse in 2023.
We will have four distinct commercial EV products in production, we have four distinct commercial EV products production.
We received important H dipped certification for both our class four and our class five six vehicles, we secured initial fleet orders for the Wi Fi six step down and strip chassis.
And we organically grew the stable business.
Additionally, we completed the overhaul of our Union City manufacturing complex. The workhorse Ranch is now capable of building 5000, and painting 3000 vehicles per year on one shift.
Richard F. Dauch: The Workhorse Ranch is now capable of building 5,000 vehicles and painting 3,000 vehicles per year on one shift. Our lean, highly flexible production facility can ramp up staffing and production in line with future market demand. At our Arrow business, we sold our first units, we are on track for FAA certification in the first quarter of this year, and we landed several government-funded grants, all while we continue to evaluate alternatives for the business. Moving to slide six.
Our lean highly flexible production facility can ramp up staffing and production in line with future market demand.
At our Aero business, we sold our first units we are on track for FAA certification and first quarter. This year landed several government funded grants all while we continue to evaluate alternatives for the business.
Moving to slide six.
Richard F. Dauch: We have stabilized production of both the W4CC and W750 and handed those production over to the plant, while continuing dealer programs and field demonstrations for both of these vehicles. Notably, we successfully overcame unexpected issues with California's HVIP program and worked with the California Air Resources Board to list the W4CC and the W750 in the HVIP program in a first-of-its-kind program for intermediate vehicle manufacturing. We were able to do this by demonstrating the strength of our service, warranty, and delivery network and complete care options for customers purchasing any Workhorse badged product.
We have stabilized production above the W foresee and WWE miles was handed those production over to the plant.
While continually dealer programs and field demonstrations for both of these vehicles.
Notably, we successfully overcame unexpected issues with California's HD program and work with the California Air Resources Board to list. The W. For Cc and the W 750, and the <unk> program and a first of its kind program for intermediate vehicle manufacturers.
We were able to do this by demonstrating the strength of our service warranty and delivery network and complete care options for customers purchasing any workhorse badged product.
Richard F. Dauch: With enough finished inventory in place, we have temporarily paused production of these products, shifting our workforce over to focus on the ramp-up of the W5-6 production in the first quarter. As orders materialize, we will add the necessary hourly workforce to meet future customer demand for all of our products. Moving to slide seven.
With enough finished inventory in place we have temporary pause production of these products shifting our workforce over to focus on the ramp up of the Wi Fi six production in the first quarter.
As orders materialize, we will add the necessary hourly workforce to meet future customer demand for all of our products.
Moving to slide seven we received final <unk> certification approval for the Wi Fi six step ban in Q4. The final critical milestone delivery of these vehicles today important California market in advance of the dance clean fleet regulation.
Richard F. Dauch: We received final ACIP certification approval for the W5-6 step van in Q4. This was the final critical milestone of delivering these vehicles to the important California market in advance of the Advanced Clean Fleet Regulation. We continue to increase our dealer network in California and have adjusted staffing and production in line with market demand over the last few months accordingly. Turning to slide 8, I wanted to share a few pictures with you of what really is being done at the Union City plant to produce our industry game-changing step van, which went from concept to production, including passing more than 250,000 miles of validation, in less than 22 months. And just in case you're wondering, this is a robust, and I mean a really robust vehicle based on the comments we are hearing back from our customers during these field demonstrations. I do not know of any startup OEM that could have delivered this type of product in less than two years.
We continue to increase our dealer network in California, and have adjusted staffing and production in line with market demand over the last few months accordingly.
Turning to slide eight I wanted to share a few pictures with you. Although it really is being done at the Union City.
<unk> to produce our industry game changing step van which went from concept to production <unk>.
Including passing more than 250000 miles of validation.
In less than 22 months.
And just in case you are wondering this is a robust and I mean, a really robust vehicle based on the comments, we're hearing back from our customers on these field demonstrations.
I did not know of any startup OEM that could have delivered this type of product in less than two years.
Richard F. Dauch: Chassis units are moving down the line on a consistent basis, and by the end of 2024, there will be four variants of the W5-6 in production. We now have our fixtures and lift assist tools in place for both the chassis line and the body line, shown in the middle of the slide. Finally, we are now painting the step bands in one of three colors.
Chassis units are moving down the line on a consistent basis and by the end of 2024 there'll be four variants of the Wi Fi six in production.
We now have our fixtures and lift assist tools in place for both the chassis line as well as the body line shown in the middle of the slide.
Finally, we are now painting the step vans in one of three colors.
Richard F. Dauch: The Workhorse Ranch is ready to roll and fulfill future customer orders. On slide nine, we continue to have strong customer interest in the W56. This is demonstrated by the receipt of our first two 15-vehicle unit orders for the step van, which we expect to deliver in 2024. As we like to say here at Workhorse, we're two for two.
The workhorse ranch is ready to roll and fulfill future customer orders.
On slide nine we continue to have strong customer interest in the Wi Fi six.
This is demonstrated by the receipt of our first 215 vehicle unit orders for the step down that we expect to deliver in 2024 as we like to say here at workhorse were two for two.
Richard F. Dauch: We also intend to introduce a longer wheel-based version of the W5-6 in the second half of 2024 based on the direct requests of several of our fleet customers, specifically in the linen and industrial supply segment. The company has multiple product demonstrations already underway, or set to begin in early 2024, with several large last-mile fleet operators, as well as state and municipal fleets, and other smaller fleet operators. Based on the demos we've had to date, we are optimistic about the prospects for the W5-6, as well as our W750 and W4CC products. We are able to go from order to delivery of a finished step van in five to six weeks, the shortest lead time for the class 5-6 step band market in North America, including custom outfit, paint, and branding. We have received extremely positive driver and fleet manager feedback reflecting the vehicle's strong performance in the field, as recently as last week at the MTA show, and from one of the largest package delivery companies in the country. According to customers, the W56 is a superior truck with innovative technology.
We also intend to reduce our longer wheelbase version of the Wi Fi six in second half of 'twenty four based on the direct request of several of our fleet customers specifically in the Linda Linden and industrial industrial supply segments.
The company has multiple product demonstrations already underway are set to begin in early 'twenty four with several large last mile fleet operators as well as state and municipal fleets and other smaller fleet operators.
Based on the dental as we've had to date, we are optimistic about the prospects for the Wi Fi six.
As well as our W 750, MW for C C products.
We are able to go from order to delivery of a finished step van and five to six weeks.
The shortest lead time for the class five six step band market in North America.
Including custom up it paint and branding.
We have extreme he received extremely positive driver and fleet manager feedback, reflecting the vehicles strong performance in the field as recently as last week, the MTA show and from the one of the largest package delivery companies in the country.
According to customers. The <unk> six is a superior truck with innovative technology.
Richard F. Dauch: Turning to slide 10, we continue to build out our commercial dealer and service capabilities to capitalize on our product roadmap. I'm particularly excited by the significant expansion of our dealer network using our strict selection criteria. We continue to expand our dealer network with a focus on those regions where CARB clean fleet and clean truck mandates will be adopted in 24 through 2027. We successfully added new certified dealers, bringing our network to 11 dealers nationwide with a 12th pending and soon to be announced. As we continue to actively expand, we have a target number of 15 to 20 dealers by the end of 2024. In addition, we have added 21 upfitting partners in the past nine months.
Turning to slide 10, we continue to build out our commercial dealer and service capabilities to capitalize on our product roadmap.
I am, particularly excited by the significant expansion of our dealer network using our strict selection criteria.
We continue to expand our dealer network with a focus on those regions, where carb clean fleet and clean truck mandates will be adopted in 24 through 2027.
We successfully added new certified dealers, bringing our network to 11 dealers nationwide with a 12 pending and soon to be announced as.
As we continue to actively expand we have a target number of 15 to 20 deals by the end of 2024.
In addition, we have added 21 updating partners in the past nine months.
Richard F. Dauch: As we recently shared, we also established partnerships with W.W. Williams and Zine Solutions to expand service and support options for customers in the field. On slide 11, within our stables operations, we continue to electrify our delivery fleet, which operates multiple delivery routes here in the Cincinnati area for FedEx ground, organically gaining new route assignments due to our superior performance. We now have seven Class IV ED units in the Missouri fleet and expect the whole fleet to be electrified in 2024.
As we recently shared we also established partnerships with Ww Williams, and <unk> solutions to expand service and support options for customers in the field.
On slide 11 within our stables operations, we continue to electrify our delivery fleet, which is operate multiple delivery routes here in the Cincinnati area for Fedex ground organically, gaining new route assignments due to our superior performance.
We now have seven class for EV units and the delivery fleet and expect the whole fleet to be electrified in 2024.
Richard F. Dauch: We executed peak season extremely well, with Q4'23 revenue up more than 90% compared to Q4'22, including the benefit of organically adding 20% of our assigned routes at the request of FedEx. The lessons we are learning at Stables are invaluable and give us tremendous credibility with fleets, not only FedEx, but all the fleets we meet with. Moving to our aero business on slide 12, we achieved important progress in the last year on drone deployment and delivery to customers. First, we launched production, sold, and delivered our first units of the Horsefly Unmanned Aerial Vehicle, or UAV. Nevertheless, during the first quarter of 24, we decided to suspend drone design and manufacturing and exclusively focus on a less capital-intensive drones as a service model and further develop our DAS products and services in this area, where we see near-term profitable growth opportunities continue to expand. Driving this decision was Arrow's continued ability to win additional grant awards from the USDA to support the National Resources Conservation Service.
We executed peak season extremely well with Q4, 'twenty three revenue up more than 90% compared to Q4 of 'twenty, two including the benefit of organically, adding 20% of our sign routes at the request of Fedex.
The lessons we are learning at stables are invaluable and give us tremendous credibility to fleets not only fedex, but all the fleets we meet with.
Moving to our Aero business on Slide 12, we achieved important progress in the last year on drone deployment and delivery to customers.
First we launched production sold and delivered our first units of the horse lie unmanned aerial vehicle or UAV.
Nevertheless, during the first quarter of 'twenty four we have decided to suspend drone design and manufacturing and exclusively focused on less capital intensive drones as a service model and further developed our das products and services in this area, where we see near term profitable growth opportunities continuing to expand.
Driving this decision was arrows continued ability to win additional grant award from the USDA to support National Resources Conservation service well.
Richard F. Dauch: What we do for the USDA, flying drones equipped with sensors, and delivering actionable data is what our drones as a service model is all about. This service has continued to grow over the last two years since we first pioneered this capability with the USDA. In January, Workhorse received an additional $500,000 grant and in February received a separate $350,000 grant to provide actionable data from sensor scanning to increase the efficiency of underserved farmers and ranchers' land use. We are in advanced discussions with additional government agencies on future scanning and service opportunities at a significant potential grant or contract level. More broadly, our strategic view for the aero business remains on track to ensure we are unlocking the most value for workhorse shareholders while also best positioning our aero business to capture and fund future growth opportunities, as they see them. With that, I'll turn it over to Bob to discuss our financial results. Thanks, Rick. Now, let's turn to slide 13.
What we do for the USDA flying drones equipped with sensors and delivering actionable data is what our drones or the service model is all about.
This services continue to grow over the last few years since we first pioneered this capability with the USDA.
In January Workhorse received an additional 500000 out of grant and then February received a separate two 350000 grant to provide actionable data from sensor scanning to increase the efficiency of underserved farmers and ranchers land use.
We are in advanced discussions with additional government agencies on future scanning and service opportunities at a significant potential grant or contract level.
More broadly our strategic view for the Aero business remains underway to ensure we are unlocking the most value for workhorse shareholders. While also best positioning our aero business to capture and fund future growth opportunities.
As they see them.
With that I'll turn it over to Bob to discuss our financial results.
Thanks, Rich, let's turn to slide 13 will cover our full year results for.
Robert M. Ginnan: We'll cover a full-year result. For the year, sales increased $8.1 million to $13.1 million for the full year 2023 compared to $5 million in 2022, primarily resulting from the increase in W4CC sales and volume. The W750 and W56 products, which launched in February of 2023, as well as the stables by Workhorse and our drone as a service offering, also contributed to the increase in revenue. Boston sales for the full year 2023 increased $0.7 million to $38.4 million compared to $37.7 million in 2022. The increase is primarily due to increased production and overhead costs to support higher sales volumes related to the new vehicle platforms and an increase in employee compensation related expenses compared to 2022 levels. This increase was partially offset by a decrease in inventory reserves, adjustments, and disposals, which were driven by the disposition of C-series inventory in 2010.
For the year sales increased $8 1 million to $13 1 million for the full year 2023 compared to $5 million in 2022.
Primarily resulting from an increase in <unk> sales and volumes.
That'd be 750, W 56 products, which launched in the second half of 2023 as well as tables by workhorse and our drilling as a service offering also contributed to the increase in revenue.
Boston sales for the full year 2023 increased <unk> 7 million to $38 4 million compared to $37 7 million in 2022 the.
The increase was primarily due to increased production and overhead cost to support higher sales volumes related to the new vehicle platforms and an increase in employee compensation related expenses compared to 2022 levels.
This increase was partially offset by a decrease in inventory reserves adjustments on disposals, which were driven by the disposition of <unk> inventory in 2022.
Robert M. Ginnan: SG&A expenses for the full year 2023 were $55.6 million, a decrease of $17.6 million compared to $73.2 million in 2022. The decrease is driven by a $25.2 million reduction in legal expenses and expenses attributable to the securities and derivative litigation settlements recognized in the prior year. This decrease was partially offset by a $3 million increase in employee compensation-related expenses, including non-cash stock-based compensation expenses.
SG&A expenses for the full year 2023 were $55 6 million decrease of $17 6 million compared to $73 2 million in 2022.
The decrease was driven by a $25 2 million reduction legal expenses and expense attributable to the securities and derivative litigation settlements recognized in the prior year.
This decrease was partially offset by $3 million increase in employee compensation related expenses, including noncash stock based compensation expense.
Robert M. Ginnan: 2.1 million increase in professional and other services expense and a 0.6 million increase in corporate insurance expense. R&D expenses for the full year 2023 were $24.5 million, an increase of $1.3 million compared to $23.2 million in 2022. The increase was primarily driven by an increase of $1.4 million in employee compensation-related expenses and a $0.8 million increase in development expenses for new products. These increases were partially offset by a $1.4 million decrease in consulting expenses.
$2 $1 million increase in professional and other services expense and $1 6 million increase in corporate insurance expenses.
R&D expenses for the full year, 2023, or $24 5 million, an increase of $1 3 million compared to $23 2 million in 2022.
The increase was primarily driven by an increase of $1 4 million employee compensation related expenses and a <unk> 8 million increase in development expenses for new products.
These increases were partially offset by $1 $4 million decrease in consulting expense.
Robert M. Ginnan: Other loss for the full year of 2023 was $10 million, compared to $13.6 million in income in 2022. Other loss in 2023 represented the impairment of our investment tropos. Other income in 2022 represented proceeds from sales fee series inventory that was previously fully reserved. Net interest expense in the current year was driven by a fair value adjustment of our convertible notes and warrants of $8.3 million and $2.1 million fees applied in connection with the Securities Purchase Agreement and the Equity Line of Credit Purchase Agreement, all set by interest earned on cash balances in our money market investments. That interest expense in the prior year was primarily related to $1.4 million of fair value adjustments, $0.3 million of contractual interest expense, and $0.4 million of loss on conversion of former convertible notes, which were exchanged for common shares during 2022.
Other loss for the full year 2023 was $10 million compared to $13 6 million income in 2022, although loss in 2023 represent the impairment of our investment <unk>. Other income in 2022 represented proceeds from the sales T series inventory that was previously fully reserved.
Net interest expense in the current year was driven by a fair value adjustment of our convertible notes and warrants of $8 3 million and $2 1 million fees applied a connection for the securities purchase agreement and the equity line of credit purchase agreement.
Set by interest earned on cash balances in our money market investment accounts.
Net interest expense in the prior year was primarily related to $1 4 million of fair value adjustments was $3 million of contractual interest expense and <unk> 4 million loss on conversion of former convertible notes, which were exchanged for common shares during 2022.
For the years ended December 31, 2023, and 2022, we incurred taxable losses, and thus no provisions for income tax benefits have been recorded.
Robert M. Ginnan: When the years ended December 31st, 2023, and 2022, we incurred taxable losses, and thus, no provisions for income tax benefits were recorded. Net loss for the full year 2023 was $124.6 million, compared to a net loss of $117.3 million in 2022. Loss from operations for the full year 2023 was $105.3 million, compared to $129 million in 2022.
Net loss for the full year 2023 was $124 6 million compared to a net loss of $117 3 million in 2022 off from operations. We will see your full year 2023, it was $105 3 million compared to a $129 million in 2022.
Turning to slide 14 to discuss our balance sheet as of December 31, 2023, we had inventory of 40 net inventory of $45 million as well as $35 8 million in cash which includes $10 million in restricted cash.
Robert M. Ginnan: Turning to slide 14 to discuss our balance sheet, as of December 31st, 2023, we had net inventory of $45 million, as well as $35.8 million in cash, which includes $10 million in restricted. We are operating efficiently and selectively resizing our team here at Workhorse while maintaining the necessary resources and skills on the team to continue to design, test, and build world-class commercial trucks. Importantly, we are taking major strengths to strengthen our financial position. We entered into a sale-leaseback agreement for Union City Manufacturing Complex in January.
We are operating efficiently and selectively recycling our team here at workhorse, while maintaining the necessary resources and skills of the team to continue to design test and build world class commercial trucks.
Importantly, we are taking major strides to strengthen our financial position, we entered into a sale leaseback agreement for Union City manufacturing complex in January.
We entered strengthens workforces financial position reflects the investments and work our team has put into refurbishing the plant and turned into a first class manufacturing facility for.
Workforce continues to support the activities of the purchaser and closing is expected in May 2024.
Robert M. Ginnan: The agreement we entered strengthens Workhorse's financial position and reflects the investments and work our team has put into refurbishing the plant and turning it into a first-class manufacturing facility. Workhorse continues to support the activities of the purchaser, and closing is expected in May of 2020. Turning to slide 15 in our 2024 overview, given the number of key customer demonstrations underway in Q1 and Q2, we intend to report on progress when it occurs. As a result, we will not be providing specific annual revenue or unit guidance at this time.
Turning to slide 15, and our 2024 overview given the number of key customer demonstrations underway in Q1 and Q2, we intend to report on progress when it occurs as a result, we will not be providing specific annual revenue or unit guidance at this time.
Workforces entering 2024, with a strong production and delivery capabilities as well a keen focus on financial discipline and cost control.
As we speak we are working hard to resolve our short term liquidity issues described in our 10-K over the year, we will maintain our focus on operational excellence and cost reduction as we increased production expand delivery of our commercial vehicles to meet our financial targets for 2024.
Robert M. Ginnan: Workhorse is entering 2024 with strong production delivery capabilities as well as a keen focus on financial discipline and cost control. As we speak, we are working hard to resolve our short-term liquidity issues described in our 10-K. Over the year, we will maintain our focus on operational excellence and cost reduction as we increase production and expand delivery of our commercial vehicles to meet our financial targets for 2024. At the same time, we will continue to value it with opportunities to strengthen our financial position. With that, I'll turn it back to Rick now to conclude.
At the same time, we will continue to evaluate opportunities to strengthen our financial position.
With that I'll turn it back to Rick now to conclude.
Thanks, Bob to wrap up the call I want to discuss our key near term priorities, which are on slide 16.
Our focus is on strengthening our financial position, while we continue advancing our product roadmaps and ramp up production as we secure orders for our commercial Evs.
In plain and simple terms, we want to make sure we have the financial runway to build and sell trucks and provide drilling services to our customers.
Keeping our goal a pioneer in the transition to zero emission commercial vehicle, there's no easy feat and it's definitely not for the faint of heart.
We believe we can we believe we will emerge as a segment winter and this once in a generation powertrain technology transition.
Richard F. Dauch: Thanks, Bob. To wrap up the call, I want to discuss our key near-term priorities, which are on slide 16. Our focus is on strengthening our financial position while we continue advancing our product roadmaps and ramping up production as we secure orders for our commercial EVs. In plain and simple terms, we want to make sure we have the financial runway to build and sell trucks and provide drone services to our customers. Achieving our goal of pioneering the transition to zero emission commercial vehicles is no easy feat, and it's definitely not for the faint of heart.
The pace of the transition to Evs is unpredictable and we cannot predict the speed at which the transition will occur.
But we can control is to ensure we are a 100% ready to meet the needs of our customers. We are prepared for the transition from every touch point of delivery process.
We have the people products processes supplier and commercial business partners to meet the needs of the market. When this EV transition hits its stride we.
We need our customers to start ramping up their own transition to EV powered vehicles and believe that two or three of the largest fleets here in North America are ready to do so hopefully soon.
Richard F. Dauch: We believe we can. We believe we will emerge as a segment winner in this once-in-a-generation powertrain technology transition. However, the pace of the transition to EVs is unpredictable, and we cannot predict the speed at which the transition will occur.
Our team's perseverance in the face of market and regulatory challenges is commendable and we remain determined and optimistic.
Richard F. Dauch: What we can control is to ensure that we are 100% ready to meet the needs of our customers. We are prepared for the transition at every touchpoint in the delivery process. We have the people, products, processes, supplier, and commercial business partners to meet the needs of the market when this EV transition hits its stride. We need our customers to start ramping up their own transition to EV-powered vehicles and believe that two or three of the largest fleets here in North America are ready to do so, hopefully soon. Our team's perseverance in the face of market and regulatory challenges is commendable, and we remain determined and optimistic.
The ground work is done and the foundations are in place for us to be the class for fixed segment later in the commercial EV segment.
We expect to emerge a winner in this space and we look forward to continue to do the work to get ourselves there.
Now, we'll open the call for questions Donald I'll turn it back over to you.
Thank you ladies and gentlemen, the floor is now open for questions. If you would like to register a question. Please press star one on your telephone keypad at this time.
<unk> total indicate that your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be.
Necessary to pick up the handset before pressing the star keys.
We do ask you please limit yourself to one question and one follow up.
Richard F. Dauch: The groundwork is done, and the foundations are in place for us to be the class 4-6 segment leader in the commercial EV segment. We expect to emerge a winner in the space, and we look forward to continuing to do the work to get ourselves there. Donna, I'll turn it back over to you. Thank you.
Jim that is star one to register a question at this time.
Today's first question is coming from Sharif.
Ill Mcgratty of BT IAG. Please go ahead.
Hey, everyone. Thanks for taking my questions.
So first of all I want to start with how do you prioritize.
Orders between that there'll be $567 50, an adobe for D. C. This year and how are you managing that capacity.
Operator: Ladies and gentlemen, the floor is now open to questions. If you would like to register a question, please press star 1 on your telephone keypad at this time. The confirmation tone will indicate that your line is in the question key.
We have two separate lines, we actually have three separate lines. We have a dedicated chassis lines with Wi Fi six which has a corresponding cab and box line. So that's a separate line and we can do about 5000 vehicles a year there we talk to our suppliers and they can ramp up to that level as well.
Operator: You may press star two if you would like to remove your question from the line. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the start button. We do ask that you please limit yourself to one question and one follow-up. Again, that is star one to register a question at... Today's first question is coming from Cherie El-Meghrabi of BTIG.
We then tap two separate lines, we had the W. For Cc line, which we are building at about four O a week.
For a day, sorry, before we put it on pause and that leads into a separate W. 750 line, which we can build one or two a day there. Okay. So if you add our plant you'd see very distinct assembly lines and it still leaves about a third of the plant open for future products, we want to do something there.
Richard F. Dauch: Please go ahead. Hey everyone, thanks for taking my question. So first, I want to start with, how do you prioritize orders between the W5-6, W7-50, and the W4-CC this year? How are you managing that capacity? We have two separate lines. We actually have three separate lines. We have a dedicated chassis line for the W5-6, which has a corresponding cab and box line.
Okay. That's helpful. Thank you and then on the Carb mandate can you tell us what you're hearing regarding its enforcement or revision.
Richard F. Dauch: So that's a separate line, and we can do about 5,000 vehicles a year there. We talk to our suppliers, and they can ramp up to that level as well. We then tapped two separate lines.
That's like the million dollar question, we've heard both sides of the equation in terms of the California Trucking Association taken upset exception with car and carb, saying that theyre very confer a firm and they're going to put it in place. This year. We just don't know the timing and I'd be guessing if I try to guess right now so.
Richard F. Dauch: We had the W4CC line, which we were building in about four a week, no, four a day, sorry, before we put it on pause. And that leads into a separate W-750 line, which we can build one or two a day there, okay? So if you were at our plant, you'd see very distinct assembly lines, and it still leaves about a third of the plant open for future products if we want to do something there. That's helpful, thank you. And then on the CARB mandate, can you tell us what you're hearing regarding its enforcement or revision? That's like the millionaire question. You know, we've heard both sides of the equation in terms of the California Trucking Association taking exception with CARB and the California Air Resources Board saying that they're very firm and they're going to put it in place this year. We just don't know the timing. I'd be guessing if I tried to guess right now. We hope sooner rather than later, and we've talked to many fleets. In many fleets in California, they have a very good handle on how many trucks they have in the state.
We hope sooner rather than later.
And we've talked to many fleets and.
And many fleets in California, they have a very good handle on how many trucks they have in the state.
They know what they have to do to meet the cut the carb mandate by the end of the year.
With that gets kicked in its a significant demand and.
And we're not sure there's a whole lot of people left to fill that demand we want to be one of them.
Alright, that's helpful and thanks for taking my questions.
Welcome.
Once again, ladies and gentlemen that is star one to register a question at this time.
Well pause for additional questions.
Once again that is star one if you would like to register a question.
At this time I would like to turn it back over to Mr. <unk> for closing comments.
Well it must be lunchtime on the east coast and we appreciate it and hopefully if you have any questions reach out to stand and we'll do.
Richard F. Dauch: They know what they have to do to meet the CARB mandate by the end of the year. That gets kicked in. It's a significant demand, and we're not sure there's a whole lot of people left to fill that demand. We wanna be one of them.
Do that and hopefully we'll be able to report some good news on our demos and that turned into orders, we will get our plant working staying busy. Thanks, a lot for your interest in workhorse. Thanks Bye.
Operator: All right, that's helpful. Thanks for taking my question. Fuck that.
Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines of log off the webcast at this time and enjoy the rest of your day.
Operator: Once again, ladies and gentlemen, that is star number one to register a question at this time. We'll pause for additional questions. Once again, that is Star 1 if you would like to register. At this time, I would like to turn it back over to Mr. Dauch for closing comments. Well, it must be lunchtime on the East Coast, and we appreciate it. Hopefully, if you have any questions, reach out to Stan, and we'll do that. And hopefully, we'll be able to report some good news on our demos, and that will turn into orders. We'll get our plant working and stay busy.
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Richard F. Dauch: Thanks a lot for your interest in Workhorse. Bye. Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest.
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