Q2 2024 Workhorse Group Inc Earnings Call

August 20, 2024

Operator: Greetings, and welcome to the Workhorse Group Q2 2024 Earnings Conference Call-In Webcast.

Greetings and welcome to the Workhorse Group Q2, 'twenty 'twenty four earnings conference call and webcast. At this time all participants are in a listen only mode. If they can watch it require operator assistance. Please press star zero on your telephone keypad.

Operator: At this time, all participants are in a listen-only mode.

Operator: We thank you for your participation today.

Operator: At this time, all participants are in a listen-only mode.

Operator: We thank you for your participation today.

Operator: If anyone should require operator assistance, please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation.

Operator: A question-and-answer session will follow the formal presentation.

A question and answer session will follow the formal presentation.

Operator: You may be placed into question queue at any time by pressing star one on your telephone keypad.

Operator: You may be placed into the question queue at any time by pressing star 1 on your telephone keypad.

You may be placed in the question queue at any time by pressing star one on your telephone keypad. We ask you. Please limit yourselves to one question and one follow up then return to the queue.

Operator: We ask that you please limit yourselves to one question and one follow-up, then return to the queue.

Operator: As a reminder, this conference is being recorded.

As a reminder, this conference is being recorded its now my pleasure to introduce your host Stan March Vice President Corporate development and Communications. Please go ahead Stan.

Operator: It's now my pleasure to introduce your host, Stan March, Vice President, Corporate Development and Communications.

Stan March: Please go ahead, Stan.

Stan March: Thank you, Kevin.

Stan March: Thank you, Kevin, and I'd like to welcome all of you to our second quarter 2024 results call.

Speaker Change: Thank you, Kevin and I'd like to welcome all of you to our second quarter 2024 results call before we begin I'd like to note that we've issued our results for the second quarter ended June 30th 'twenty 'twenty four via press release, and we filed our 10-Q last evening for that period, you can find the release and accompanying presentation.

Stan March: And I'd like to welcome all of you to our second quarter 2024 results call.

Stan March: Before we begin, I'd like to note that we've issued our results for the second quarter, end of June 30th, 2024, via press release, and we filed our 10-Q last evening for that period.

Stan March: Before we begin, I'd like to note that we've issued our results for the second quarter end of June 30th, 2024 via press release, and we filed our 10Q last evening for that period.

Stan March: You can find the release and accompanying presentation on the investor relations section of our website.

Stan March: You can find the release and accompanying presentation on the Investor Relations section of our website.

Speaker Change: On the Investor Relations section of our website, we'll be tracking along with the presentation. During this call.

Stan March: We'll be tracking along with the presentation during this call.

Stan March: Also joining us on today's call are Rick Dauch, our CEO, and Bob Ginnan, our CFO.

Stan March: Also joining us on today's call are Rick Dauk, our CEO, and Bob Ganan, our CFO.

Speaker Change: Also joining us on today's call are Rick Doyle, our CEO and Bob <unk> our CFO.

Stan March: For today's agenda, please turn to slide three.

Speaker Change: For today's agenda. Please turn to slide three following my opening remarks, I'll hand, the call over to Rick Who'll give you an update on the success, we've made on our strategic operational and financial actions during the quarter. Bob will then walk us through our financial results for the quarter, Rick will then wrap it up.

Stan March: Bob will then walk us through our financial results for the quarter.

Stan March: Rick will then wrap it up before we open the call to questions.

Speaker Change: Before we open the call to questions.

Stan March: Our disclaimer can be found on slide four.

Our disclaimer can be found on slide four some of the comments. We made today are forward looking and are subject to certain provisions and also subject to risks and uncertainties as well.

Stan March: Some of the comments we made today are forward-looking and are subject to certain provisions and also subject to risks and uncertainties as well.

Stan March: You can read the full disclaimer statement and our periodic filings on file with the SEC, including the 10-Q that we just filed, as well as today's earnings release.

Can read the full disclaimer statement and our periodic filings on file with the SEC, including the 10-Q that we just filed as well as today's earnings release, and now with that I'd like to turn the call over to Rick out Rick.

Stan March: Rick will then wrap it up before we open the call to questions.

Stan March: And now with that, I'd like to turn the call over to Rick Dauch.

Rick Dauch: Rick?

Rick Dauch: Thanks, Stan.

Stan March: Our disclaimer can be found on slide four.

Rick Doyle: Thanks, Dan and good morning, everyone. Thank you for taking the time to join us today.

Stan March: Some of the comments that we made today are forward-looking and are subject to certain provisions and also subject to risks and uncertainties as well.

Rick Dauch: Good morning, everyone.

Stan March: You can read the full disclaimer statement and our periodic filings on file with the SEC, including the 10-Q that we just filed, as well as today's earnings release.

Rick Doyle: During the second quarter, we made important progress on our product roadmap.

Rick Dauch: Thank you for taking the time to join us today.

Speaker Change: The work, we did with significant our financial results for the quarter reflect that there are still remains a lot of work ahead of us.

Rick Dauch: During the second quarter, we made important progress on our EV product roadmap. While the work we did was significant, our financial results for the quarter reflect that there still remains a lot of work ahead of us, to achieve our goals for 2024 and beyond, some under our control and some outside of our control.

Speaker Change: To achieve our goals for 2024 and beyond.

Speaker Change: So I'm under our control and some outside of our control.

Rick Dauch: We operate in a nascent and challenging EV market.

Speaker Change: We operate in a nascent and challenged EV market.

Rick Dauch: The first half of 2024 saw slower than anticipated. Industry-wide electric vehicle adoption rates driven by the lack of government policy enforcement and delays in funding incentives available to our California dealers. Other macro factors affecting the industry include slower rollouts of electric vehicle charging systems and infrastructure nationwide and government red tape in various states to get approvals for electric vehicles in order for them to reach the end customer.

Speaker Change: The first half of 'twenty 'twenty four saw slower than anticipated.

Speaker Change: History wide electric vehicle adapter rates driven by the lack of government policy enforcement and delays in funding incentives available to our California dealers.

Speaker Change: Other macro factors affecting the industry include slower rollout of electric vehicle charging systems and infrastructure nationwide.

Speaker Change: And government Red tape in various states to get approvals for electric vehicles in order for them to reach the end customers.

Rick Dauch: The pending presidential election with two far different views and investments in the green economy, is influencing fleet owner decisions on whether to move forward on investments in EV technology, both in terms of charging system installation and EV truck purchases may go hand in hand.

Speaker Change: The pending presidential election, with too far different views and investments in the green economy.

Speaker Change: Is influencing fleet owner decisions on whether to move forward on investments Navy technology. Both in terms of charging system installation and E V truck purchases. They go hand in hand.

Rick Dauch: Nevertheless, based on our discussion with multiple fleets, we are starting to see some early positive signs, and we remain encouraged by the long-term opportunity in the Class 4-6 Work Truck segment on the transition to EV vehicles.

Speaker Change: Nevertheless, based on our discussions with multiple fleets, we are starting to see some early positive signs and we remain encouraged by the long term opportunity in the class four to six work truck segment on the track.

Speaker Change: The EV vehicles.

Rick Dauch: We're optimistic that demand going into 2025 and beyond will begin to materialize and grow, driven by increasing federal and state admission requirements and mandates, H-VIP certification of our W-5-6, and new state-level government centers and subsidies that encourage EV adoption long-term.

Speaker Change: We're optimistic that demand going into 2025 and beyond will begin to materialize it grow driven by increasing federal and state admissions requirements or mandates H <unk> certification of our W. Five six and new state level government incentives and subsidies that encourage EV adoption long term.

Rick Dauch: I believe we are doing everything we can to position Workhorse to capture future commercial fleet demand.

Speaker Change: I believe we are doing everything we can.

Speaker Change: Physician workhorse to capture future commercial fleet demand.

Rick Dauch: Most importantly, we have and are continuing to develop reliable, capable products and have a world-class manufacturing plant with adequate capacity in which to build them.

Speaker Change: Most importantly, we have and are continuing to develop reliable capable products and have a world class manufacturing plant with adequate capacity in which to build them.

Rick Dauch: The W56 is proving to be everything we expected and everything our customers specified. The traction we are getting with customers is real. Customer feedback after multi-week demos has been extremely positive, and we're starting to see initial orders come in. Based on this direct customer feedback after the demos, we have also kicked off the design of two new variants of the W5-6, which would be through testing and early production by year end or in early 2025.

The W. Five six is proving to be everything we expected and everything our customers specified.

Speaker Change: The traction we're getting with customers is real.

Speaker Change: Customer feedback after multi week demos have been extremely positive and we're starting to see initial orders come in.

Rick Dauch: More on that in a moment.

Speaker Change: Based on this direct customer feedback after the demos. We have also kicked off the design of two new variants of the W. Five six wouldn't be through testing and then.

Speaker Change: Early production by year end or in early 2025 more on that in a moment.

Rick Dauch: At the same time, we have taken critical and, at times, extremely difficult and painful actions to reduce expenses to extend our financial runway.

Speaker Change: At the same time, we have taken critical and at times extremely difficult and painful actions to reduce expenses to extend our financial runway.

Operator: Greetings and welcome to the Workhorse Group Q2 2024 Earnings Conference calling webcast.

Operator: Greetings and welcome to the Workhorse Group Q2 2024 Earnings Conference calling webcast. At this time, I'll just pin Cerny-Lisson Omi-Mode. If they do want to require operator assistance, please press star zero on your telephone keypad.

Rick Dauch: We divested the aerospace business. Reduce headcount across the organization, furloughed workers, and delayed a future product program by 12 to 18 months in order to conserve cash.

Speaker Change: We divested the aerospace business.

Operator: At this time, I'll just pin Cerny-Lisson Omi-Mode.

Speaker Change: Reduced head count across the organization furloughed workers and delayed our future product program by 12 to 18 months in order to conserve cash.

Operator: If they do want to require operator assistance, please press star zero on your telephone keypad.

Operator: A question and an intercession will follow the formal presentation.

Operator: A question and an intercession will follow the formal presentation. He may be placed into question Q at any time by pressing star one on your telephone keypad. We ask you please limit yourselves to one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded.

Rick Dauch: Taking it all together, we are confident in the long-term market opportunity of the EV transition and need to fight our way through the next 6-12 months to emerge as a viable and successful EV OEM.

Speaker Change: Taking it altogether, we are confident in the long term market opportunity of the E V transition and need to fight our way through the next six to 12 months emerged as a viable and successful E V O E M.

Operator: He may be placed into question Q at any time by pressing star one on your telephone keypad.

Operator: We ask you please limit yourselves to one question and one follow-up, then return to the queue.

Rick Dauch: We believe in Workhorse and our ability to win in the market with our high-quality people, trucks, business partners, and service capabilities, which differentiate us from other EV OEMs in the Class 4-6 segment commercial segment.

Operator: As a reminder, this conference is being recorded.

Speaker Change: We believe it in workhorse and our ability to win in the market with our high quality people trucks business partners and service capabilities, which differentiate us from other E D. Oems in the class four six segment commercial cycle.

Stan March: It's not my pleasure to introduce your host, Stan March, Vice President, Corporate Development and Communications.

Kevin: It's not my pleasure to introduce your host, Stan March, Vice President, Corporate Development and Communications. Please go ahead Stan.

Stan March: Please go ahead Stan.

Stan March: Thank you Kevin and I'd like to welcome all of you to our second quarter, 2024 Results Call.

Stan March: Thank you Kevin and I'd like to welcome all of you to our second quarter, 2024 Results Call. Before we begin, I'd like to note that we've issued our results for the second quarter and the June 30th, 2024, by press release, and we filed our 10Q last evening for that period. You can find the release in a company presentation on the Investor Relations section of our website. We'll be tracking along with the presentation during this call.

Stan March: And now, with that, I'd like to turn the call over to Rick Dauk.

Rick Dauch: I'll now dive into the actions we took in the quarter.

Speaker Change: I'll now dive into the actions we took in the quarter.

Stan March: Rick?

Stan March: Before we begin, I'd like to note that we've issued our results for the second quarter and the June 30th, 2024, by press release, and we filed our 10Q last evening for that period. You can find the release in a company presentation on the Investor Relations section of our website.

Rick Dauch: Turn to slide five to discuss the key achievements in the quarter. On the sales front, in June, we entered a strategic collaboration with our certified dealer KTS in Kingsburg, California, with the commitment to supply 141 W4CC cab chassis units in 2024 and 2025.

Speaker Change: Turning to slide five to discuss our key achievements in the quarter.

Rick Dauk: Thanks, Stan, and good morning, everyone.

On the sales brought in June we entered a strategic collaboration collaboration with our certified dealer K T S and Kingsbury, California with a commitment to supply 141 W. For C. C cab chassis units in 'twenty, 'twenty, four and 'twenty 'twenty five.

Stan March: We'll be tracking along with the presentation during this call.

Rick Dauch: Also joining on today's call, a RICDALC, our CEO, and Bob Ganan, our CFO.

Stan March: Also joining on today's call, a RICDALC, our CEO, and Bob Ganan, our CFO. For today's agenda, please turn to slide three. Following my opening remarks, I'll hand the call over to Rick, who'll give you an update on the success we've made on our strategic, operational, and financial actions during the quarter, Bob will then walk us through our financial results for the quarter, Rick will then wrap it up before we open the call to questions.

Rick Dauch: KKS is starting to see real demand across both small private and government-funded entities ahead of the importance of CARB ACF mandates.

Speaker Change: K T S are starting to see real demand across both small private and government funded ahead of the enforcement Carb ACF mandate.

Stan March: For today's agenda, please turn to slide three.

Rick Dauch: We are hearing that some government-funded fleets are only allowed to buy EV trucks going forward in California starting late this year.

Speaker Change: We are hearing that some government funded fleets are only allowed to buy 80 trucks going forward in California, starting late this year.

Stan March: Following my opening remarks, I'll hand the call over to Rick, who'll give you an update on the success we've made on our strategic, operational, and financial actions during the quarter, Bob will then walk us through our financial results for the quarter, Rick will then wrap it up before we open the call to questions.

Rick Dauch: Workhorse received payment for the first 30 trucks from KTS in the second quarter. However, due to delays in the CARB H-VIP voucher approval, audit, and payment process, KTS was unable to deliver the trucks in custom, limiting the revenue recognized by the company in the second quarter.

Speaker Change: Workhorse receive payment for the first 30 trucks from K T S in the second quarter.

Or due to delays in the carb a script voucher approval audit and payment process Kgs was unable to deliver the trucks and customers limiting the revenue recognized by the company in the second quarter.

Stan March: Our disclaimer can be found on slide four.

Stan March: Our disclaimer can be found on slide four. From the comments that we made today are forward-looking and are subject to certain provisions, and also subject to risks and uncertainties as well. You can read the full disclaimer statement in our periodic filings on file of the SEC, including the 10Q, that we just filed as well as today's earnings release.

Stan March: From the comments that we made today are forward-looking and are subject to certain provisions, and also subject to risks and uncertainties as well.

Rick Dauch: The positive news is we have started to see some progress in this area early in the third quarter.

The positive news as we have started to see some progress in this area early in the third quarter.

Stan March: You can read the full disclaimer statement in our periodic filings on file of the SEC, including the 10Q, that we just filed as well as today's earnings release.

Rick Dauch: We also reached a major milestone with the award of a source well contract for the procurement in the category of class 4 to 8 chassis and cabs, related equipment, the past, present, and future.

Speaker Change: We also reached a major milestone with the award of a source well contract for the procurement and the category a class four to eight chassis and cab.

Rick Dauch: And now with that, I'd like to turn the call over to RICDALC.

Rick Dauch: Rick, thanks, Stan.

Rick Dauch: Good morning, everyone.

Rick Dauch: Good morning, everyone. Thank you for taking the time to join us today. During the second quarter, we made important progress on our EDO product roadmap. While the work we did was significant, our financial results for the quarter reflect that there are still remains a lot of work ahead of us to achieve our goals for 2024 and beyond. Some under our control and some outside of our control. We operate in a nascent and challenged EV market.

Speaker Change: Ladies and equipment.

Rick Dauch: Thank you for taking the time to join us today.

Speaker Change: He is in services.

Rick Dauch: This significant achievement allows Workhorse to expand our commercial reach to government, education, and non-profit sectors in all 50 states and in Canada, and we're starting to see interest through that SourceWell contract.

Speaker Change: This significant achievement allows workhorse to expand our commercial reach to government education and nonprofit sectors in all 50 states and in Canada, and we're starting to see interest through that source well contract.

Rick Dauch: During the second quarter, we made important progress on our EDO product roadmap. While the work we did was significant, our financial results for the quarter reflect that there are still remains a lot of work ahead of us to achieve our goals for 2024 and beyond.

Speaker Change: To support our roadmap to increase our footprint coverage in the United States, We continue to expand our commercial presence.

Rick Dauch: For our roadmap, increase our footprint coverage in the United States, we continue to expand our commercial presence, adding three new dealer partnerships in early EV adoption regions of the country, specifically the Northwest region and the Northeast corridor.

Rick Dauch: Some under our control and some outside of our control.

Rick Dauch: We operate in a nascent and challenged EV market.

Speaker Change: Adding three new dealer partnerships and early E D adoption regions of the country, specifically, the northwest region and the North East corridor.

Rick Dauch: The first half of 2024 saw slower than anticipated.

Rick Dauch: The first half of 2024 saw slower than anticipated. Industry-wide electric vehicle adopter race driven by the lack of government policy enforcement and delays and funding incentives available to our California dealers. Other macro factors affecting the industry include slower rollouts of electric vehicle charging systems and infrastructure nationwide and government red tape in various states to give approvals for electric vehicles in order for them to reach the end customers. The pending presidential election with two far different views and investments in the green economy is influencing fleet owner decisions on whether to move forward on investment in EV technology, both in terms of charging system insulation and EV truck purchases.

Rick Dauch: Industry-wide electric vehicle adopter race driven by the lack of government policy enforcement and delays and funding incentives available to our California dealers.

Rick Dauch: As we continue to execute on our product roadmap and business plans, we also recognize the need for continued thoughtful decisions to conserve cash and reduce costs across the organization. With limited sales and revenue in the near term, we need to dramatically reduce our cash burn rate and conserve cash to extend our financial runaway until EV adoption rates pick up in the future.

Speaker Change: As we continue to execute on our product roadmap and business plans. We also recognize the need for continued thoughtful decisions to conserve cash and reduce costs across the organization.

Rick Dauch: Other macro factors affecting the industry include slower rollouts of electric vehicle charging systems and infrastructure nationwide and government red tape in various states to give approvals for electric vehicles in order for them to reach the end customers.

Speaker Change: With limited sales and revenue in the near term, we needed to dramatically reduce our cash burn rate and conserve cash to extend our financial runway until EV adoption rates pick up in the future and we took those decisive actions.

Rick Dauch: And we took those decisive actions.

Rick Dauch: The pending presidential election with two far different views and investments in the green economy is influencing fleet owner decisions on whether to move forward on investment in EV technology, both in terms of charging system insulation and EV truck purchases.

Rick Dauch: Last quarter we told you that we made the difficult decisions to reduce our workforce and furlough a number of our union city employees.

Speaker Change: Last quarter, we told you that we made the difficult decisions to reduce our workforce and furlough a number of our Union city employees.

Rick Dauch: Our team is the key to our near and long-term success.

Speaker Change: Our team is the key to our near and long term success as we can.

Rick Dauch: As we ramp up production alignment with customer orders and industry trends in the second half, our goal is to return our full team to work as soon as possible.

Speaker Change: Ramp up production in alignment with customer orders and industry trends in the second half our goal is to return our full team to work as soon as possible.

Rick Dauch: They go hand in hand.

Rick Dauch: They go hand in hand. Nevertheless, based on our discussion with multiple fleets, we are starting to see some early positive signs and we remain encouraged by the long-term opportunity in the Class 4-6 Work Truck segment on the transition to EV vehicles. We're optimistic that the man going to 2025 and beyond will begin to materialize and grow during by increasing federal and state admission requirements and mandates, HVIP certification of our W56 and new state level government centers that subsidies and encourage ED adoption long-term.

Rick Dauch: Nevertheless, based on our discussion with multiple fleets, we are starting to see some early positive signs and we remain encouraged by the long-term opportunity in the Class 4-6 Work Truck segment on the transition to EV vehicles.

Rick Dauch: Additionally, as part of our disciplined approach to cost management and focus on extending our financial runway, we completed the previously disclosed vestiture of the AeroBusiness to an affiliate of ATW Partners on June 6, 2024.

Speaker Change: Additionally, as part of our disciplined approach to cost management focus on extending our financial runway. We completed the previously disclosed the divestiture of the Aero business to an affiliate of a T. W partners on June six 2024.

Rick Dauch: We're optimistic that the man going to 2025 and beyond will begin to materialize and grow during by increasing federal and state admission requirements and mandates, HVIP certification of our W56 and new state level government centers that subsidies and encourage ED adoption long-term.

Rick Dauch: The Arrow Investorship provides a company with monthly cost savings, and approximately $400,000 of monthly savings, enhances the company's ability to concentrate all of our time and resources in our commercial electric vehicle truck business.

Speaker Change: The Arrow divestiture provides a company with monthly cost savings.

And approximately $400000 of monthly savings enhances the company's ability to concentrate all of our time and resources on our commercial electric vehicle truck business.

Rick Dauch: As part of our earn out provisions in the sale agreement, Workhorse will receive a portion of future Aero business proceeds on revenues from contingent sources.

Speaker Change: Part of our earn out provisions and the sale agreement workhorse will receive a portion of future Arrow business proceeds on revenues from contingent sources.

Rick Dauch: I believe we are doing everything we can to position workhorse to capture future commercial fleet demand.

Rick Dauch: I believe we are doing everything we can to position workhorse to capture future commercial fleet demand. Most importantly, we have and are continuing to develop reliable, capable products and have a world-fast manufacturing plant with adequate capacity in which to build them. The W56 is prudent to be everything we expected and everything our customers specified. The traction we are getting with customers is real. Customer feedback after multi-week demos has been extremely positive and we're starting to see initial orders come in.

Rick Dauch: Most importantly, we have and are continuing to develop reliable, capable products and have a world-fast manufacturing plant with adequate capacity in which to build them.

Rick Dauch: Moving to slide six, I want to spend just a moment framing the overall EV industry backdrop, specifically in the commercial work truck and step van segment.

Speaker Change: Moving to slide six I want to spend just a moment framing the overall E D industry backdrop spin.

Rick Dauk: Thank you for taking the time to join us today.

Rick Dauk: During the second quarter, we made important progress on our EV product roadmap. While the work we did was significant, our financial results for the quarter reflect that there still remains a lot of work ahead of us to achieve our goals for 2024 and beyond, some under our control and some outside of our control.

Speaker Change: Specifically in the commercial work truck and step van segment.

Rick Dauch: The W56 is prudent to be everything we expected and everything our customers specified.

Rick Dauch: At times here at Workhorse, we get painted with a general, EV, automotive, or Class 7 heavy truck, which is not truly applicable to the segment where we compete, where there is a compelling business case for fleets to make the transition to EV technology.

At times Youre at Workhorse, we get painted with a general E D automotive our class seven heavy truck brush, which is not truly applicable to the segment, where we compete well.

Rick Dauch: The traction we are getting with customers is real. Customer feedback after multi-week demos has been extremely positive and we're starting to see initial orders come in.

Rick Dauch: Based on this direct customer feedback after the demos, we have also kicked off the design of two new variants of the W56, which would be through testing and early production by year in or in early 2025. More on that in a moment. At the same time, we have taken critical and at times extremely difficult and painful actions to reduce expenses to extend our financial runway. We divested the aerospace business, reduced headcount across the organization, furloughed workers, and delayed a future product program by 12 to 18 months in order to conserve cash.

Speaker Change: Where there is a compelling business case for fleets to make the transition to <unk> technology.

Rick Dauch: The global move to reduce carbon emissions was crystallized in the Paris Accord back in 2016.

Rick Dauk: We operate in a nascent and challenging EV market. The first half of 2024 saw slower than anticipated industry-wide electric vehicle adoption rates, driven by the lack of government policy enforcement and delays in funding incentives available to our California dealers. Other macro factors affecting the industry include slower rollouts of electric vehicle charging systems and infrastructure nationwide and government red tape in various states to get approvals for electric vehicles in order for them to reach the end customers.

Speaker Change: The global move to reduce carbon emissions will crystallize in the Paris accord back in 2016.

Rick Dauch: China and the European-based auto and truck OEMs have moved decisively to meet strict government mandates in those regions of the world.

Speaker Change: China and the European based auto and truck Oems have moved decisively to meet strict government mandates in those regions of the world.

Rick Dauch: More on that in a moment.

Rick Dauch: At the same time, we have taken critical and at times extremely difficult and painful actions to reduce expenses to extend our financial runway. We divested the aerospace business, reduced headcount across the organization, furloughed workers, and delayed a future product program by 12 to 18 months in order to conserve cash.

Rick Dauch: I experienced this personally while I was the CEO of Delphi Technologies, living in London from 2019 to 2020. The growth in EV demand in China and parts of Europe was robust and far outpaced the forecasted growth of EV-powered vehicles here in North America.

Speaker Change: I expect I experienced this personally what I was the CEO of Delphi technologies living in London for 2019 and 2020.

Speaker Change: The growth in EV demand in China, and parts of Europe was robust and far outpaced the forecasted growth.

Speaker Change: E D powered vehicles here in North America.

Rick Dauk: The pending presidential election, with two far different views and investments in the green economy, is influencing fleet owner decisions on whether to move forward on investments in EV technology, both in terms of charging system installation and EV truck purchases may go hand in hand.

Rick Dauch: Here in the United States, our government position on the Paris Accord has changed at least three times at the national level.

Speaker Change: In the United States, our government position on the Paris Accord has changed at least three times at the national level.

Rick Dauch: Taking it all together, we are confident in the long-term market opportunity of the ED transition and need to fight our way through the next six to 12 months to merge as a viable and successful ED OEM. We believe it's in workhorse and our ability to win in the market with our high quality people, trucks, business partners, and service capabilities, which differentiate us from other ED OEMs in the class or six segment commercial segment.

Rick Dauch: But a number of states, led by California, have been developing policies, to address the class 4A truck sector, the clean truck and advanced clean fleet or ACF mandate, which were codified in 2023 with important fleet EV milestones at 24 and 25 through 2035.

Rick Dauk: Nevertheless, based on our discussion with multiple fleets, we are starting to see some early positive signs and we remain encouraged by the long-term opportunity in the class 4 to 6 work truck segment on the transition to EV vehicles. We are optimistic that demand going into 2025 and beyond will begin to materialize and grow, driven by increasing federal and state emission requirements and mandates, HVIP certification of our W5-6, and new state-level government incentives and subsidies that encourage EV adoption long-term.

Speaker Change: But a number of states led by California had been developing policies to address the class eight truck sector.

Rick Dauch: We believe it's in workhorse and our ability to win in the market with our high quality people, trucks, business partners, and service capabilities, which differentiate us from other ED OEMs in the class or six segment commercial segment.

Speaker Change: <unk> truck and advanced clean fleet or ACF mandates, which are qualified in 'twenty two 'twenty three with important fleet E D milestones at 24 and 25 through 2035.

Rick Dauch: Currently, there are three legal actions underway seeking a redress or challenge or delay in the implementation of these California mandates designated by CARB.

Currently there are three legal actions underway seeking a redress or challenge or a delay in the implementation of these California mandates designated by Carb.

Rick Dauch: I'll now dive into the actions we took in the quarter.

Rick Dauch: I'll now dive into the actions we took in the quarter. Turning slide five to discuss the key achievements in the quarter. On the sales brunt, in June, we entered a strategic collaboration with our certified dealer TTS in Kingsburg, California, with the commitment to supply a 141 W4CC cab chassis in 2024 and 2025. KTS is starting to see real demand across both small private and government funders ahead of the important carbon ACF mandate.

Rick Dauch: Turning slide five to discuss the key achievements in the quarter.

Rick Dauch: On the sales brunt, in June, we entered a strategic collaboration with our certified dealer TTS in Kingsburg, California, with the commitment to supply a 141 W4CC cab chassis in 2024 and 2025.

Rick Dauch: In addition to California, 17 other states have announced the adoption of the CARB mandates between 2024 and 2030.

Speaker Change: In addition to the California 17, other states have announced the adoption of the carb mandates between 'twenty 'twenty four and 'twenty 30.

Rick Dauch: And to put this into perspective, when fully enacted, the number of Class 4-6 trucks requiring replacement between 2024 and 2035 is more than 350,000 units.

Speaker Change: And to put this into perspective, when fully enacted a number of class four six trucks requiring replacement between 'twenty four 'twenty four and 'twenty 35 is more than 350000 units.

Rick Dauch: KTS is starting to see real demand across both small private and government funders ahead of the important carbon ACF mandate.

Rick Dauk: I believe we are doing everything we can to position Workhorse to capture future commercial fleet demand. Most importantly, we have and are continuing to develop reliable, capable products and have a world-class manufacturing plant, with adequate capacity in which to build them.

Rick Dauch: This is a target-rich environment, and we are prepared with the right vehicles and the internal production and supply capacity to secure a significant share of that demand if and when it's materialized.

Speaker Change: This is a target rich environment, and we are prepared with the right vehicles and the internal production and supply capacity.

Rick Dauch: We are hearing that some government funders' seats are only allowed by ED trucks going forward in California starting late this year.

Rick Dauch: We are hearing that some government funders' seats are only allowed by ED trucks going forward in California starting late this year. Workhorse received payment for the first 30 trucks from KTS in the second quarter. However, due to delays in the carbon ACF voucher approval, audit, and payment process, KTS was unable to deliver the trucks and customers, limiting the revenue recognized by the company in the second quarter. The positive news is we have started to see some progress in this area early in the third quarter.

Rick Dauk: The W5-6 is proving to be everything we expected and everything our customers specified. The traction we are getting with customers is real. Customer feedback after multi-week demos has been extremely positive, and we're starting to see initial orders come in.

Speaker Change: <unk>, a significant share of that demand if and when it materializes.

Rick Dauk: Based on this direct customer feedback after the demos, we have also kicked off the design of two new variants of the W5-6, which would be through testing and early production by year-end or in early 2025.

Rick Dauch: Workhorse received payment for the first 30 trucks from KTS in the second quarter. However, due to delays in the carbon ACF voucher approval, audit, and payment process, KTS was unable to deliver the trucks and customers, limiting the revenue recognized by the company in the second quarter.

Rick Dauch: While compelling use case and financial returns exist and lofty emission reduction goals have been made by major last mile fleet operators across the country, this pending demand has yet to translate into meaningful vehicle orders in the Class 4 through 6 EV medium duty truck segment.

Rick Dauk: More on that in a moment.

Speaker Change: While compelling use case with financial returns exist and lofty emission reduction goals have been made by major last mile fleet operators across the country.

Rick Dauk: At the same time, we have taken critical and, at times, extremely difficult and painful actions to reduce expenses to extend our financial runway. We divested the aerospace business, reduced headcount across the organization, furloughed workers, and delayed a future product program by 12 to 18 months in order to conserve cash.

Speaker Change: This pending demand has yet to translate into meaningful vehicle orders in the class four through six E D medium duty truck segment.

Rick Dauk: Taking it all together, we are confident in the long-term market opportunity of the EV transition, and need to fight our way through the next 6 to 12 months to emerge as a viable and successful EV OEM.

Rick Dauch: The positive news is we have started to see some progress in this area early in the third quarter.

Rick Dauch: Let's move to Class 7 and talk about the Corporate ESG Committee. Following the Paris Accord announcement, major corporations across the globe that operate and compete in the last-mile delivery space began publicly stating and promoting their own comprehensive ESG policy.

Speaker Change: Let's move to class seven.

Speaker Change: Talk about the corporate at ESG commitments.

Rick Dauch: We also reached a major milestone with the award of a source well contract for the procurement and the category of class four to eight chassis and cabs related equipment that has reason services. This significant achievement allows Workhorse to expand our commercial reach to government, education, and nonprofit sectors in all 50 states and in Canada and we're starting to see interest through that source well contract, for our roadmap, increase our footprint coverage in the United States, we continue to expand our commercial presence, adding three new dealer partnerships in early ED adoption reasons of the country, specifically the Northwest Region and the Northeast Corridor.

Speaker Change: Following the Paris accord announcement major corporations across the globe that operate and compete in the last mile delivery space began publicly stating and promoting their own comprehensive ESG policies.

Rick Dauch: This significant achievement allows Workhorse to expand our commercial reach to government, education, and nonprofit sectors in all 50 states and in Canada and we're starting to see interest through that source well contract, for our roadmap, increase our footprint coverage in the United States, we continue to expand our commercial presence, adding three new dealer partnerships in early ED adoption reasons of the country, specifically the Northwest Region and the Northeast Corridor.

Rick Dauch: I want to share with you some of the stated policies of some of the largest Last Mile Fleet operators, our core targeted customers.

Speaker Change: I wanted to share with you some of the stated policies of some of the largest last mile fleet operators, our core targeted customers.

Rick Dauch: These policy positions are found on their respective websites.

Speaker Change: These policy positions are found on their respective websites.

Rick Dauch: As you can see, many are targeting net zero carbon emissions a full decade earlier than the Paris Accords require.

Speaker Change: You can see many are targeting net zero carbon emission a full decade earlier than the Paris accords require.

Rick Dauch: 2040 is only 16 years away, which means these fleets must start making the transition soon if they are to really accomplish the stated objectives on CHG emission reduction.

2040 is only 16 years away.

Speaker Change: Which means these fleets must start making the transition soon if they are to really accomplish the stated objectives on C. H G emission reduction.

Rick Dauch: As we continue to execute on our product roadmap and business plans, we also recognize the need for continued thoughtful decisions to conserve cash, and we use costs across your organization. With limited sales and revenue in the term, we need to dramatically reduce our cash burn rate and conserve cash to extend our financial runaway until ED adoption makes pickup in the future, and we took those decisive actions.

Rick Dauch: We have spoken and met with every one of these companies, on this short list, and have conducted successful product demonstrations with several.

We have spoken and met with every one of these companies on this shortlist and have conducted successful product demonstration with several of them.

Rick Dauch: There is a wide range in operational and capital planning and investment decision making underway amongst these fleets.

Speaker Change: There's a wide range of operational and capital planning and investment decision, making underway amongst these fleets.

Rick Dauch: Some fleets, like Amazon and DHL, are focused on using smaller class 3 step bands.

Speaker Change: Some police like Amazon and DHL are focused on using smaller class III step vans, that's not where we play.

Rick Dauch: Last quarter, we told you that we made the difficult decisions to reduce our workforce and furlough our number of our union city employees.

Rick Dauch: That's not where we play.

Rick Dauch: Most of the others, though, have fleets that are heavily populated with what we call the P-1000 version of step bands.

Speaker Change: Most of the others, though have fleets that are heavily populated with what we call. The P 1000 version of step Downs.

Rick Dauch: Our team is the key to our near and long-term success. As we ramp up our production alignment with customer orders and industry trends in the second half, our goal is to return our full team to work as soon as possible. Additionally, as part of our discipline approach to cost management and focus on extending our financial runaway, we completed the previously disclosed investiture of the Arrow Business to an affiliate of ATW partners on June 6, 2024.

Rick Dauk: We believe in Workhorse and our ability to win in the market with our high-quality people, trucks, business partners, and service capabilities, which differentiate us from other EV OEMs in the Class 4-6 segment commercial segment.

Rick Dauch: And that is exactly where we play with the W5-6, the class 5-6 step bend segment.

Speaker Change: And that is exactly where we play with the Wi Fi six the class five six step van segment.

Rick Dauk: I'll now dive into the actions we took in the quarter.

Rick Dauk: Turning to slide 5 to discuss the key achievements in the quarter. On the sales front, in June, we entered a strategic collaboration with our certified dealer KTS in Kingsburg, California, with a commitment to supply 141 W4CC cab chassis units in 2024 and 2025.

Rick Dauch: Many of these fleets, dating back to 2017-18, have had mixed results, with early adoption of EV-powered vehicles to include range issues, especially in severe weather conditions.

Rick Dauk: KTS is starting to see real demand across both small private and government-funded seats ahead of the enforcement of the CARB ACF mandate. We are hearing that some government-funded seats are only allowed to buy EV trucks going forward in California starting late this year.

Speaker Change: Many sleep dating back to 2017 18 have had mixed results with early adoption of E. D power vehicles to include rains issues.

Rick Dauch: Additionally, as part of our discipline approach to cost management and focus on extending our financial runaway, we completed the previously disclosed investiture of the Arrow Business to an affiliate of ATW partners on June 6, 2024. The Arrow Investiture provides a company with monthly cost savings and approximately $400,000 monthly savings, enhances the company's ability to concentrate all of our time resources in our commercial electric vehicle truck business.

Rick Dauk: Workhorse received payment for the first 30 trucks from KTS in the second quarter. However, due to delays in the CARB ACF voucher approval, audit, and payment process, KTS was unable to deliver the trucks to end customers, limiting the revenue recognized by the company in the second quarter.

Speaker Change: Especially in severe weather conditions.

Rick Dauch: Payload Capacity Issues, system durability issues, spare parts availability, service delays, and in some extreme cases, thermal events on early versions of EV trucks.

Speaker Change: Payload capacity issues.

Rick Dauch: The Arrow Investiture provides a company with monthly cost savings and approximately $400,000 monthly savings, enhances the company's ability to concentrate all of our time resources in our commercial electric vehicle truck business. As part of our Earn Out provisions in the sale agreement, workhorse will receive a portion of future Arrow business proceeds on revenues from contingent sources.

Speaker Change: System durability issues spare parts availability service delays and in some extreme cases thermal events on early versions of EV trucks.

Rick Dauch: We have heard, and in some cases, we have witnessed their stories at Fleet Customs.

Speaker Change: We have heard and in some cases, we have witnessed their stories athlete customers.

Rick Dauch: As part of our Earn Out provisions in the sale agreement, workhorse will receive a portion of future Arrow business proceeds on revenues from contingent sources.

Rick Dauch: The result is that many industry players are moving slowly and cautiously into the zero-emission technology transition.

Speaker Change: The result is that many industry players are moving slowly and cautiously into the zero emission technology transition.

Rick Dauch: Moving to slide 6, I want to spend just a moment framing the overall ED industry backdrop, specifically in the commercial work truck and step band segment.

Rick Dauch: Moving to slide 6, I want to spend just a moment framing the overall ED industry backdrop, specifically in the commercial work truck and step band segment. At times here at workhorse, we get painting with a general ED automotive or class 7 heavy truck brush, which is not truly applicable to the segment where we compete, where there is a compelling business case for fleets to make the transition to ED technology. The global move to reduce carbon emissions with crystallized and the Paris Accord back in 2016.

Rick Dauch: This generational technology transition will not happen overnight, as many industry pundits predicted and forecasted back in 2018 and 2021. It is costly and there are many hurdles that will still need to be overcome. Specifically, affordability, which is mostly driven by battery costs, which most battery components are coming from offshore, and the installation of adequate EV charging infrastructure.

Speaker Change: This generational technology transition will not happen overnight as many industry pundits predicted and forecasted back in 2018 to 2021.

Rick Dauch: At times here at workhorse, we get painting with a general ED automotive or class 7 heavy truck brush, which is not truly applicable to the segment where we compete, where there is a compelling business case for fleets to make the transition to ED technology.

Speaker Change: It is costly and there are many hurdles that will still need to be overcome.

Speaker Change: Specifically affordability, which is mostly driven by a battery calls it's most battery components are coming from offshore and the installation of Asquith EV charging infrastructure.

Rick Dauch: The global move to reduce carbon emissions with crystallized and the Paris Accord back in 2016.

Rick Dauch: For the larger fleets, we are talking about multi-billions of CapEx investments over multiple sites over a period of up to a decade or more.

Speaker Change: The larger fleets, we're talking about multi billions of capex investments over multiple sites over a period of up to a decade or more.

Rick Dauch: China and the European-based auto and truck OEMs have moved decisely to meet strict government mandates in those regions of the world.

Rick Dauch: China and the European-based auto and truck OEMs have moved decisely to meet strict government mandates in those regions of the world. I experienced this personally while I was the CEO of Delphi Technologies, living in London from 2019 to 2020. The growth in ED demanded China and parts of Europe was robust and far outpaced the forecasted growth of ED power vehicles here in North America. In the United States, our government position on the Paris Accord has changed at least three times at the national level.

Rick Dauch: We are working closely with two to three of these fleets as a potential primary vehicle supplier going forward.

Speaker Change: We are working closely with two to three of these lease as a potential primary vehicle supplier going forward.

Rick Dauch: I experienced this personally while I was the CEO of Delphi Technologies, living in London from 2019 to 2020.

Rick Dauch: We stand ready to meet their needs whenever they decide to undertake the investments necessary to start their transition to EV-powered commercial vehicles.

Speaker Change: We stand ready to meet their needs whenever they decide to undertake the investments necessary to start their transition to E. D powered commercial vehicles.

Rick Dauch: The growth in ED demanded China and parts of Europe was robust and far outpaced the forecasted growth of ED power vehicles here in North America.

Rick Dauch: Moving to slide 8, I want to spend a moment to provide you a snapshot of the voucher dynamics in the most important state in the country for EV adoption, California.

Speaker Change: Moving to slide eight I want to spend a moment to provide you a snapshot of the voucher dynamics and the most important to state in the country for EV adoption, California.

Rick Dauch: In the United States, our government position on the Paris Accord has changed at least three times at the national level.

Rick Dauch: You have heard me say in the past that the CARB HVIP program and enforcement of the Clean Fleet Mandate standards are critical to the near-term success and viability of the nascent EV commercial truck industry.

Speaker Change: You have heard me say in the past that the carb HVAC program and the enforcement of the clean fleet mandate standards are critical to the near term success and viability of the nascent E D commercial truck industry.

Rick Dauch: But a number of states, led by California, have been developing policies to address the class 4-8 truck sector to clean truck and advance clean fleet or ACF mandates, which were codified in 2023 with important fleet ED milestones in 24 and 25 through 2035. Currently, there are three legal actions underway seeking a redress or challenge or delay in the implementation of these California mandates designated by CARB. In addition to the California, 17 other states have announced the adoption of the CARB mandates between 2024 and 2030, and to put this in the perspective, when fully enacted, the number of class 4 or 6 trucks requiring replacement between 24 and 24 and 2035 is more than 350,000 units.

Rick Dauch: As you can see, Current carbon issues are not achieving plan goals.

As you can see.

Speaker Change: Current carbon initiatives are not achieving planned goals.

Rick Dauch: Less than 2% of Class 4-6 new truck registrations have received H-VIP vouchers over the last two years, well below the 9% EV targeted for fleet operators in 2025.

Speaker Change: Less than 2% of class four to six new truck registrations have received H Smith vouchers over the last two years well below the 9% <unk> targeted for fleet operators in 2025.

Rick Dauch: Currently, there are three legal actions underway seeking a redress or challenge or delay in the implementation of these California mandates designated by CARB.

Rick Dauch: Currently, CARB has not yet leveled penalties on fleets for failing to meet ACF mandates. Until the legal challenges of the CARB mandates are resolved and fines start being leveled for fleets failing to meet the mandates, many fleets are simply taking a wait-and-see attitude towards investing in charging stations and EV trucks.

Speaker Change: Currently carb has not yet level penalties on fleets for failing to meet ACB ACF mandates.

Rick Dauch: In addition to the California, 17 other states have announced the adoption of the CARB mandates between 2024 and 2030, and to put this in the perspective, when fully enacted, the number of class 4 or 6 trucks requiring replacement between 24 and 24 and 2035 is more than 350,000 units.

Until the legal challenges to the card mandates are resolved and.

Speaker Change: And finally start being level.

Speaker Change: For fleets failing to meet the mandates many fleets are simply taking a wait and see attitude towards them Betsy and charging stations at EV trucks.

Rick Dauch: Our focus has been on identifying those fleets that are not waiting and have approved investment plans to move forward in 2024 and 2025 to include Mission Linen, Vestas, and one of the largest global blast mile fleets in the world.

Speaker Change: Our focus has been on identifying those fleets are not waiting and have approved and have approved investment plans to move forward in 'twenty 'twenty four 'twenty five to include mission Lindon, that's just and one of the largest global last mile fleets in the world.

Rick Dauch: This is a target mission environment, and we are prepared with the right vehicles and the internal production and supply capacity to secure a significant share of that demand if and when it materializes. While compelling use case and financial returns exist and lawfully emission reduction goals have been made by major last mile fleet operators across the country, this pending demand has yet to translate into meaningful vehicle orders in the class 4 through 6.0 medium duty truck segment.

Rick Dauch: All three of these companies have successfully demonstrated they're capable of the W5-6 on their actual routes in California and two other states. And two of these companies have already placed orders with us, and we are working hard to secure an order from the Third Fleet.

Speaker Change: All three of these companies have successfully demonstrated the cable and the W. Five six on their actual routes in California.

Rick Dauch: While compelling use case and financial returns exist and lawfully emission reduction goals have been made by major last mile fleet operators across the country, this pending demand has yet to translate into meaningful vehicle orders in the class 4 through 6.0 medium duty truck segment.

Speaker Change: Other states.

Speaker Change: And two of these companies have already placed orders with us and we are working hard to secure an order from the third fleet.

Rick Dauch: I want to spend a moment on slide 9 to talk about our own Stables by Workhorse program as we are one of only a handful of third-party contractors across the country that has actually successfully executed an ICE to ED fleet transition in the past 2-3 years on our own nickel.

Speaker Change: I'm going to spend a moment on slide nine to talk about our own staples by Workhorse program. As we are all we are one of only a handful of third party contractors across the country, there's actually successfully executed and the ice to EV fleet transition in the past two three years on our own nickel.

Rick Dauch: Let's move to class 7 to talk about the corporate ESG commitments. Following the Paris Accord announcement, major corporations across the globe that operate and compete in the last mile delivery space began publicly stating and promoting their own comprehensive ESG policies. I want to share with you some of the stated policies of some of the largest last mile fleet operators, our core targeted customers. These policy positions are found on their respective websites.

Rick Dauch: I would like to share with you some of the key data we are able to share with fleet customers based on our real-world results after executing our own fleet electrification efforts.

I would like to share with you some of the key data we are able to share with fleet customers based on a real world results have to execute our own fleet electrification efforts.

Rick Dauch: Our goal was to operate our fleet of EVs alongside our ICE, and compare the total cost of ownership, TCO, with the ACT Research ICE to EV model. The real-world results we achieved on our own FedEx routes here in Ohio confirm the ACT model's prediction.

Our goal was to operate our fleet of these alongside our isolate.

Speaker Change: And compare the total cost of ownership Tcl with the a C T research ice to EV model.

Rick Dauch: As you can see, many are targeting net zero carbon emission a full decade earlier than the 2040 is only 16 years away, which means these fleas must start making the transition soon if they are to really accomplish the state objectives on CHG emission reduction. We have spoken and met with every one of these companies on this short list and had conducted successful product demonstration with several of them. There is a wide range in operational and capital planning and investment decision making underway amongst these fleets.

Speaker Change: The real World results, we achieved on our own Fedex routes here in Ohio confirmed the ACP miles prediction with a payback period of less than five years without any state level tenets of grants.

Rick Dauch: With a payback period of less than five years, without any state-level tenants or grants, And in fact, we found actual TCO of 1.7 times the model projections when dealing with the oldest, meaning age, maintenance, and test trucks, which reflected large percentage of the set vans on the road at the largest leads in North America today.

Speaker Change: And in fact, we found actual TCE O of one seven times the model protection when dealing with the oldest meaning age maintenance intense trucks, which reflect a large percentage of the step vans on the road at the largest fleets in North America today.

Rick Dauch: We have spoken and met with every one of these companies on this short list and had conducted successful product demonstration with several of them.

Rick Dauch: The bottom line is that there is a financial business case to be made by transition to EV trucks in the commercial work truck segment, even without incentives.

Speaker Change: The bottom line is that there is a financial business case to be made by transition to EV trucks in the commercial work truck segment, even without incentives.

Rick Dauch: There is a wide range in operational and capital planning and investment decision making underway amongst these fleets.

Rick Dauch: Some fleets, like Amazon and DHL, are focused on using smaller class-restep bands.

Rick Dauch: Some fleets, like Amazon and DHL, are focused on using smaller class-restep bands. That's not where we play. Most of the others, though, have fleets that are heavily populated with what we call the P1000 version of step bands, and that is exactly where we play with the W56, the Class 5-6 step band segment. Many A-sleets, dating back to 2017-18, have had mixed results with early adoption of EV power vehicles to include range issues, especially in severe weather conditions, payload capacity issues, system durability issues, spare parts availability, service delays, and in some extreme cases, thermal events on early versions of EV trucks.

Rick Dauch: On the lower left side of the slide, we summarize the real-world results ranges from our stables operation. And this data tracks what we are seeing in our demo truck deployments for last-mile fleet operators at multiple customers. The savings are real, and we use this data during our discussion with the aforementioned fleets and targeted customers.

Speaker Change: On the lower left side of the slide we summarize the real world results ranges from our stables operations.

Rick Dauch: That's not where we play.

Speaker Change: And this data tracks, what we have seen in our demo truck deployments for last mile fleet operators at multiple customers. The savings are real and we use this data during our discussion with the aforementioned fleets and targeted customers.

Rick Dauch: Most of the others, though, have fleets that are heavily populated with what we call the P1000 version of step bands, and that is exactly where we play with the W56, the Class 5-6 step band segment.

Rick Dauch: Our own experience here in Ohio, it's stable, and during four to six customer demos across the country in California, Tennessee, Ohio, Connecticut, and Massachusetts, validate these facts.

Speaker Change: Our own experience here in Ohio, it's stable and during four to six customer demos across the country in California, Tennessee, Ohio, Connecticut, and Massachusetts validate these facts.

Rick Dauch: Many A-sleets, dating back to 2017-18, have had mixed results with early adoption of EV power vehicles to include range issues, especially in severe weather conditions, payload capacity issues, system durability issues, spare parts availability, service delays, and in some extreme cases, thermal events on early versions of EV trucks.

Rick Dauch: We often only charge our trucks every other day or every third day, except during extreme hot or cold weather situations.

Speaker Change: We often only charge our trucks every other day or every third day, except during extreme hot or cold weather situations and one demo on a route that averaged less than 25 to 30 miles per day in the city environment. The W. Five six only need to be charged one time per week.

Rick Dauch: In one demo on a route that averaged less than 25 to 30 miles per day in a city environment, the W56 only needed to be charged one time per week.

Rick Dauch: We have heard, in some cases, we have witnessed their stories at fleet customers.

Rick Dauch: We have heard, in some cases, we have witnessed their stories at fleet customers. The result is that many industry players are moving slowly and cautiously into the zero-emission technology transition. This generational technology transition will not happen overnight, as many industry punnets predicted in forecasts back in 2018 and 2021. It is costly, and there are many hurdles that will still need to be overcome. Specifically, affordability, which is mostly driven by a battery cost, which most battery components are coming from offshore, and the installation of adequate EV charging infrastructure, for the larger fleets, we are talking about multi-billions of CAPEX investments over multiple sites over a period of up to a decade or more.

Rick Dauch: So our truck's performing very well out in the field.

Speaker Change: So our trucks perform very well out in the field.

Rick Dauch: The result is that many industry players are moving slowly and cautiously into the zero-emission technology transition.

Rick Dauch: Moving to slide 10 and turning to our commercial vehicle program.

Speaker Change: Moving to slide 10, and turning to our commercial vehicle programs, we continue to gain traction and positive feedback from customers, mostly for small initial purchase orders.

Rick Dauk: The positive news is we have started to see some progress in this area early in the third quarter.

Rick Dauch: We continue to gain traction and positive feedback from customers, mostly for small initial purchase orders, and ongoing commercial discussions with the larger police on future truck orders tied to their investments and installation of adequate EV charging systems infrastructure with lead times of 3 to 12 months.

Rick Dauk: We also reached a major milestone with the award of a source well contract for the procurement in the category of Class 4-8 chassis and cabs, with related equipment, accessories, and services. This significant achievement allows Workhorse to expand our commercial reach to government, education, and nonprofit sectors in all 50 states and in Canada, and we're starting to see interest through that source well contract.

Rick Dauch: This generational technology transition will not happen overnight, as many industry punnets predicted in forecasts back in 2018 and 2021.

Speaker Change: And the ongoing commercial discussions with larger fleets on few truck orders tied to their investments and installation of adequate EV charging systems infrastructure with lead times are three to 12 months.

Rick Dauch: It is costly, and there are many hurdles that will still need to be overcome. Specifically, affordability, which is mostly driven by a battery cost, which most battery components are coming from offshore, and the installation of adequate EV charging infrastructure, for the larger fleets, we are talking about multi-billions of CAPEX investments over multiple sites over a period of up to a decade or more.

Rick Dauch: In addition to the KTS purchase order, we also progressed across a number of new commercial partnerships, including delivery of a W4CC box truck to McAbee Trucking following a successful field demonstration.

Speaker Change: In addition to the K T. S purchase order, we also progress across a number of new commercial partnerships, including delivery of a W. For C. C box truck Mccabe trucking following a successful field demonstration.

Rick Dauch: This electric vehicle is set to perform a 120-mile daily round-trip mail route between Blacksburg, South Carolina, and Shelby, North Carolina, in support of the U.S. Postal Service.

Speaker Change: This electric vehicles says that to perform a 120 miles daily round trip mail route between Blacksburg, South Carolina in Shelby North Carolina in support of the U S Postal service.

Rick Dauch: We are working closely with two of the three of these fleets as a potential primary vehicle supplier going forward. We stand ready to meet their needs and whenever they decide to undertake the investments necessary to start their transition to ED-powered commercial vehicles.

Rick Dauch: This is our first win with a third-party contractor for a U.S.

Speaker Change: This is our first win with a third party contractor for U S Postal service.

Rick Dauch: Postal Service.

Speaker Change: We also announced the delivery of a W. Five six step band as part of an ongoing collaboration with nor Cal transports enrichment, California, just outside of San Francisco.

Rick Dauch: We also announced the delivery of a W5-6 step van as part of an ongoing collaboration with NorCal Transports in Richmond, California, just outside of San Francisco.

Rick Dauch: Moving to slide 8, I want to spend a moment of riding you a snapshot of the voucher dynamics in the most important state in the country for EV adoption, California.

Rick Dauch: Moving to slide 8, I want to spend a moment of riding you a snapshot of the voucher dynamics in the most important state in the country for EV adoption, California. You have heard me say in the past that the CARB-HV program and enforcement of the Clean Fleet mandate standards are critical to the near-term success and viability of the nascent ED commercial truck industry. As you can see, current carbon issues are not achieving plan goals.

Rick Dauch: NorCal is a West Coast innovator and last mile package delivery contractor, which will serve as another example of real world EV performance, will allow us also to go head-to-head with at least two of our key competitors in the segment, and we are confident that the W5-6 Step Van will prove to be a more capable truck.

Speaker Change: Nor Cal has a west coast innovator in last mile package delivery contractor, which will serve as another example, a real world E V performance.

Rick Dauch: You have heard me say in the past that the CARB-HV program and enforcement of the Clean Fleet mandate standards are critical to the near-term success and viability of the nascent ED commercial truck industry.

Rick Dauch: Less than 2% of class 4-6 new truck registrations have received HVIP vouchers over the last two years, well below the 9% ED target for fleet operators in 2025. Currently, CARB is not yet leveled penalties on fleets propelling to meet ACF mandates. Until the legal challenges of the CARB mandates are resolved and finally start being leveled for fleets failing to meet the mandates, many fleets are simply taking a wait and see a attitude towards investing in charging stations and ED trucks.

Speaker Change: How us also to go head to head with at least two of our key competitors in the segment and we are confident the W. Five six step ban will prove to be a more capable truck based on early feedback from other fleets in California, we have successfully tested archrock.

Rick Dauch: As you can see, current carbon issues are not achieving plan goals. Less than 2% of class 4-6 new truck registrations have received HVIP vouchers over the last two years, well below the 9% ED target for fleet operators in 2025.

Rick Dauch: Based on early feedback from other fleets in California, we have successfully tested our truck. We also entered an upfit program with Sure Fitters, which offers a ship-through solution to commercial EV customers. The partnership launched with 13 pre-configured upfit packages available to workhorse dealers, specialized for last mile delivery and vocational trucks for W5-6 and W7-50 step-downs.

Speaker Change: We also entered an update program with <unk>, which offers a ship through solution to commercial EDI customers. The partnership launched with 13 pre configured update packages available to workhorse dealers specialized for last mile delivery and vocational trucks for W. Five six MW 750 step downs.

Rick Dauch: Currently, CARB is not yet leveled penalties on fleets propelling to meet ACF mandates. Until the legal challenges of the CARB mandates are resolved and finally start being leveled for fleets failing to meet the mandates, many fleets are simply taking a wait and see a attitude towards investing in charging stations and ED trucks.

Rick Dauch: Additionally, full-body packages from the Tough Lite, CMN truck bags, and Rugby are included for the W4CC cab chassis, with additional upfit packages to be added throughout the remainder of 2024 and beyond.

Speaker Change: Additionally, full body packages from a tough light CMS truck beds in rugby are included the W. For TC cab chassis with additional update packages to be added throughout the remainder of 2024 and beyond.

Rick Dauch: Turning to slide 11, building on the success of the W5-6, we will introduce a 200-inch wheel-based version. And I've already secured orders from a customer who was impressed by the technical superiority of the W5-6 platform, but required a larger cargo capacity to meet their specific daily needs. Our own experience at Stables also validated the need for the longer wheelbase capable of handling a larger cubic volume. Our W5-6 units operate in stables, often cube out before they load out. The extended wheelbase version of the W5-6 will accommodate Workhorse's next generation step-van body. It will span 22 feet with an impressive cargo volume of 1,200 cubic feet.

Turning to slide 11 building on our sex of success of the W. Five six.

Rick Dauch: Our focus has been on identifying those fleets that are not weighted and have approved and have approved investment plans to move forward in 2024 and 25 to include mission linen, vests, and one of the largest globe glass mouth fleets in the world. All three of these companies have successfully demonstrated the capable of the W56 on their actual routes in California and to other states and two of these companies have already placed orders with us and we are working hard to secure an order from the third fleet.

Speaker Change: Introduce a 200 inch wheel base version.

Speaker Change: Already secured orders from a customer who was impressed by the technical superior superiority of the W. Five six platform, but required in larger cargo capacity to meet their specific daily needs.

Rick Dauch: All three of these companies have successfully demonstrated the capable of the W56 on their actual routes in California and to other states and two of these companies have already placed orders with us and we are working hard to secure an order from the third fleet.

Speaker Change: Our own experience at stables also validate the need for the longer wheelbase capable of handling a larger cubic volume.

Speaker Change: Our W. Five circuitous operating stables, often cube out before they load out.

Rick Dauch: I want to spend a moment on slide 9 to talk about our own stables by workhorse program.

Rick Dauch: I want to spend a moment on slide 9 to talk about our own stables by workhorse program. As we are one of only a handful of third-party contractors across the country that is actually successfully executed in ice to ED fleet transition in the past two to three years on our own nickel. I would like to share with you some of the key data we are able to share with fleet customers based on our real world results as we are executing our own fleet electrification efforts.

Speaker Change: The extended wheelbase version of the W. Five six will accommodate workhorses next generation step van body.

Rick Dauch: As we are one of only a handful of third-party contractors across the country that is actually successfully executed in ice to ED fleet transition in the past two to three years on our own nickel.

It will spend 22 feet with an impressive cargo volume of 1200 cubic feet.

Rick Dauch: Final durability testing will be completed in Q3, and initial production and first deliveries of this product will be expected in Q4.

Speaker Change: I'm Gonna durability testing will be completed in Q3 and initial production of the first deliveries of this product were expected in Q4.

Rick Dauch: I would like to share with you some of the key data we are able to share with fleet customers based on our real world results as we are executing our own fleet electrification efforts.

Rick Dauch: I also want to emphasize, based on conversations with other fleets, that they are indicating that the products mix could be up to 25% or greater for the 1,200 cubic feet step band, which will be built across the same assembly line and paint system that we currently use for the 178-inch wheelbase, 1,000 cubic feet version of the W56.

Speaker Change: I also want to emphasize based on conversation with other fleets that they are indicating that the products mix could be up to 25% or greater for the 200 cubic feet step down, which we built across the same assembly lines and paint system that we currently use for the W. The 178 is wheel base 1000 cubic feet version of the W. Five six.

Rick Dauch: Our goal was to operate our fleet of EDs alongside our ice fleet and compare the total cost of ownership TCO with the ACT research ice to ED model.

Rick Dauch: Our goal was to operate our fleet of EDs alongside our ice fleet and compare the total cost of ownership TCO with the ACT research ice to ED model. The real world results we achieve on our own FedEx route to Ohio confirmed the ACT miles prediction with a payback of a period of less than five years without any state level tenants or grants. In fact, we found actual TCO of 1.7 times the model prediction when dealing with the oldest, meaning age, maintenance and tent structs which reflected large percentage of the set bands on the road at the largest fleet in North America today.

Rick Dauch: The real world results we achieve on our own FedEx route to Ohio confirmed the ACT miles prediction with a payback of a period of less than five years without any state level tenants or grants.

Speaker Change: Yeah.

Rick Dauch: We continue to expand, on slide 12, the dealer and service network and geographies in which customers can purchase workhorse vehicles, and they are working to ensure that our customers can take advantage of available incentives, which vary by state, and in some cases, cities, or economic zones within a state.

Rick Dauk: To support our roadmap and increase our footprint coverage in the United States, we continue, to expand our commercial presence, adding three new dealer partnerships in early EV adoption regions of the country, specifically the Northwest region and the Northeast corridor.

Speaker Change: We continue to expand on slide 12, the dealer and service network and geographies in which customers can purchase workhorse vehicles and they are working to ensure that our customers can take advantage of available incentives, which vary by state and in some cases cities for economic zones within a state.

Rick Dauch: In fact, we found actual TCO of 1.7 times the model prediction when dealing with the oldest, meaning age, maintenance and tent structs which reflected large percentage of the set bands on the road at the largest fleet in North America today.

Rick Dauch: California is a key market as the W-5-6, W-7-50, and W-4-C sits all qualified for incentives offered by H-VIP and I-CIP programs. Through H-VIP, vehicle purchasers and participating dealers are eligible to apply for a base voucher of $85,000 per W-5-6 purchase.

Speaker Change: California is a key market as the W. Five six W. Some 50 MW foresee this all qualified for incentives offered by <unk> and <unk> programs.

Rick Dauch: The bottom line is that there is a financial business case to be made by transition to ED trucks in the commercial work truck segment even without incentives.

Rick Dauch: The bottom line is that there is a financial business case to be made by transition to ED trucks in the commercial work truck segment even without incentives. On the lower left side of the slide, we summarize the real world results ranges from our stable operations and this data tracks what we are seeing in our demo truck deployments for last mile fleet operators at multiple customers. The savings are real and we use this data during our discussion with the aforementioned police and targeted customers.

Speaker Change: Through H Bip vehicle purchase and participating dealers are eligible to apply for a base voucher of $85000 per Wi Fi six purchase.

Rick Dauch: On the lower left side of the slide, we summarize the real world results ranges from our stable operations and this data tracks what we are seeing in our demo truck deployments for last mile fleet operators at multiple customers. The savings are real and we use this data during our discussion with the aforementioned police and targeted customers.

Rick Dauch: If the vehicle's based in isosomes.

Speaker Change: If the vehicles base in Iceland, So please understand that get additional incentive vouchers.

Rick Dauch: Please understand that we have additional intent about, In some cases, a fleet owner can get enough incentive money to generate a payback of less than three to six months on an EV truck investment.

Speaker Change: In some cases, a fleet owner and get it up and send money to generate a payback of less than three to six months on an E. The truck investment.

Rick Dauch: Our own experience here at Ohio is stable and during 4-6 customer demos across the country in California, Tennessee, Ohio, Connecticut, and Massachusetts validate these facts.

Rick Dauch: Our own experience here at Ohio is stable and during 4-6 customer demos across the country in California, Tennessee, Ohio, Connecticut, and Massachusetts validate these facts. We often only charge our trucks every other day or every third day except during extreme hot or cold weather situations. In one demo on a route that averaged less than 25-30 miles per day in a city environment, the W56 only needed to be charged one time per week. So our trucks perform very well out in the field.

Rick Dauch: And we continue to add dealers, including the Ziegler Truck Group in Minnesota, Iowa and Wisconsin, Malia in New York City, and Echo Auto in North Boston.

Speaker Change: And we continue to add dealers, including the Ziegler truck group in Minnesota, Iowa, Wisconsin, Malia in New York City, and Echo auto in North Boston.

Rick Dauch: With that, let me turn the call over to Bob to discuss our financial results and the recent steps we have taken to strengthen our financial position.

Rick Dauk: As we continue to execute on our product roadmap and business plans, we also recognize the, need for continued thoughtful decisions to conserve cash and reduce costs across the organization. With limited sales and revenue in the near term, we need to dramatically reduce our cash, burn rate and conserve cash to extend our financial runaway until EV adoption rates pick up in the future, and we took those decisive actions.

Speaker Change: With that let me turn the call over to Bob to discuss our financial results and the recent steps we've taken to strengthen our financial position.

Rick Dauch: We often only charge our trucks every other day or every third day except during extreme hot or cold weather situations.

Rick Dauch: In one demo on a route that averaged less than 25-30 miles per day in a city environment, the W56 only needed to be charged one time per week.

Bob Ginnan: Thanks, Rick.

Bob: Thanks, Rick let's turn to slide 13 during the quarter, we enacted additional proactive measures to conserve cash and reduce costs across the organization.

Bob Ginnan: Let's turn to slide 13.

Rick Dauk: Last quarter, we told you that we made the difficult decisions to reduce our workforce, and furlough a number of our union city employees. Our team is the key to our near and long-term success, and as we ramp up production alignment, with customer orders and industry trends in the second half, our goal is to return our full team to work as soon as possible.

Speaker Change: We continue to operate at reduced head count a net reduction of approximately 50% of our staff through a combination of reductions attrition and are in the arrow divestiture, along with the decision to furlough 73 employees at the Union City manufacturing facility I.

Rick Dauch: So our trucks perform very well out in the field.

Bob Ginnan: During the quarter, we enacted additional proactive measures to conserve cash and reduce costs across the organization. We continue to operate at reduced headcount, a net reduction of approximately 50% of our staff through a combination of reductions, attrition, and the aero-divest attrition, along with the decision to furlough 73 employees at the Union City Manufacturing Facility.

Rick Dauch: Moving to slide 10 and turning to our commercial vehicle programs, we continue to gain traction and positive feedback from customers mostly for small initial purchase orders and ongoing commercial discussions with the investment and installation of adequate EV charging systems infrastructure with lead times at 3-12 months. In addition to the KTS purchase order, we also progress across a number of new commercial partnerships, including delivery of a W4CC box truck to Mackabee Trucking on a successful field demonstration.

Bob Ginnan: I am pleased we have brought back 16 of those employees so far. As previously disclosed, we also undertook other cost-saving initiatives, including the deferral of approximately 20% of executives' cash compensation into the third quarter, delayed the W56 cab chassis launch, and completed the divestiture of the company's aero business along with other cost-saving measures, to put a finer point on the impact of these actions and other reductions.

Speaker Change: I am pleased we have brought back 16 of those employees so far.

Speaker Change: As previously disclosed quote disclose we also undertook other cost saving initiatives, including the deferral of approximately 20% of executive cash compensation into the third quarter delayed the W. 56 cab chassis launch and completed the divestiture of the company's Aero business, along with other cost saving measures.

Rick Dauk: Additionally, as part of our disciplined approach to cost management and focus on extending, our financial runaway, we completed the previously disclosed divestiture of the Aero business to an affiliate of ATW Partners on June 6, 2024. The Aero divestiture provides the company with monthly cost savings and approximately, $400,000 of monthly savings, enhances the company's ability to concentrate all of our time and resources in our commercial electric vehicle truck business.

Rick Dauk: As part of our earn-out provisions in the sale agreement, workforce will receive a portion, of future Aero business proceeds on revenues from contingent sources.

Rick Dauch: This electric vehicle set to perform a 120 mile daily round trip, mail route between Blacksburg, South Carolina, and Shelby North Carolina in support of the U.S. Postal Service.

Rick Dauch: This electric vehicle set to perform a 120 mile daily round trip, mail route between Blacksburg, South Carolina, and Shelby North Carolina in support of the U.S. Postal Service. This is our first win with a third-party contractor for a U.S. Postal Service. We also announced a delivery of a W56 step ban as part of an ongoing collaboration with NorCal Transport in Richmond, California, just outside of San Francisco. NorCal is a West Coast innovator and last mile package delivery contractor which will serve as another example of real-world EV performance.

Speaker Change: To put a finer point on the impact of these actions and other reductions we have reduced the cash burn rate from approximately $11 million a month to $4 million per month, and just the last three months alone.

Bob Ginnan: We've reduced the cash burn rate from approximately $11 million a month to $4 million per month in just the last three months alone.

Rick Dauch: This is our first win with a third-party contractor for a U.S.

Bob Ginnan: Ensuring workhorse remains listed on the National Exchange significantly benefits the shareholders and business as it enables a wider diversity of financing options and market availability as we move forward.

Speaker Change: Ensuring we're close remains listed on the National exchange significantly benefits the shareholders and business as it enables a wider diversity of financing options in market availability as we move forward. Therefore, following the stockholders' approval to authorize a reverse stock split we enacted a one for 20 reverse split and officially regained.

Rick Dauch: Postal Service.

Rick Dauch: We also announced a delivery of a W56 step ban as part of an ongoing collaboration with NorCal Transport in Richmond, California, just outside of San Francisco. NorCal is a West Coast innovator and last mile package delivery contractor which will serve as another example of real-world EV performance.

Bob Ginnan: Therefore, following the stockholder's approval to authorize a reverse stock split, we enacted a 1 for 20 reverse split and officially regained NASDAQ compliance.

Speaker Change: As that compliance.

Bob Ginnan: Turning now to highlights from quarter on slide 14.

Speaker Change: Turning now to highlights from the quarter on slide 14 during the second quarter, we continued to take steps to extend our operational runway and manage our cash flow efficiently.

Rick Dauk: Moving to slide six, I want to spend just a moment framing the overall EV industry backdrop, specifically in the commercial work truck and step van segment.

Rick Dauk: At times here at workforce, we get painted with a general EV automotive or class seven, heavy truck brush, which is not truly applicable to the segment where we compete, where there is a compelling business case for fleets to make the transition to EV technology.

Rick Dauch: We will allow us also to go head-to-head with at least two of our key competitors in the segment, and we are confident that W56 step ban will prove to be a more capable truck based on early feedback from other fleets in California, we have successfully tested our truck. We also entered an update program with Sherpenders, which offers a ship-through solution to commercial EV customers. The partnership launched with 13 pre-configured upded packages available with workforce dealers, specialized for last mile delivery and vocational trucks for W56 and W7-57s. Additionally, full-body packages from a tough-light CNN truck beds and rugby are included with the W4CC cab chassis with additional upded packages to be added throughout the remainder of 2024 and beyond.

Rick Dauk: The global move to reduce carbon emissions was crystallized in the Paris Accord back, in 2016.

Bob Ginnan: During the second quarter, we continue to take steps to extend our operational runway and manage our cash flow efficiently.

Rick Dauk: China and the European-based auto and truck OEMs have moved decisively to meet strict, government mandates in those regions of the world.

Rick Dauk: Here in the United States, our government position on the Paris Accord has changed at, least three times at the national level.

Rick Dauk: I experienced this personally while I was the CEO of Delphi Technologies, living in, London from 2019 to 2020.

Rick Dauk: A number of states, led by California, have been developing policies to address the class, 4A truck sector, the clean truck and advanced clean fleet or ACF mandates, which were codified in 2023 with important fleet EV milestones of 24 and 25 through 2035.

Rick Dauk: The growth in EV demand in China and parts of Europe was robust and far outpaced the, forecasted growth of EV-powered vehicles here in North America.

Bob Ginnan: We had additional successful financing this quarter and continue our discussion with parties related to the sale-leaseback transaction for Union City Facility.

Speaker Change: Additional successful financing this quarter and continue our discussions with parties related to the sale leaseback transaction or Union city facility.

Rick Dauch: We also entered an update program with Sherpenders, which offers a ship-through solution to commercial EV customers. The partnership launched with 13 pre-configured upded packages available with workforce dealers, specialized for last mile delivery and vocational trucks for W56 and W7-57s.

Bob Ginnan: Recent activity reinforces our optimism about our ability to drive additional purchase orders this year and grow our revenue.

Speaker Change: Recent activity reinforces our optimism about our ability to drive additional purchase orders this year and grow our revenues.

Bob Ginnan: Sales net of returns and allowances for the second quarter of 2024 were $800,000 compared to $4 million in the same period last year. The decrease in sales was primarily due to lower W4CC vehicle sales compared with the same period a year ago, which was partially offset by an increase in other service revenue generated from operating the stables by Workhorse Road and drones as a service revenue before the divestiture and other service revenue.

Speaker Change: Sales net of returns and allowances for the second quarter of 2024, or 800000 compared to $4 million in the same period last year.

Speaker Change: The decrease in sales was primarily due to lower Debbie for C. C vehicle sales compared to the same period, a year ago, which was partially offset by an increase in other service revenue generated from operating the staples by workhorse Roke and drove into the service revenue before the divestiture and other service revenue.

Rick Dauch: Additionally, full-body packages from a tough-light CNN truck beds and rugby are included with the W4CC cab chassis with additional upded packages to be added throughout the remainder of 2024 and beyond.

Rick Dauch: Turning to slide 11, building on a success of the W56, we will introduce a 200-inch wheel-based version and have articles secured orders from a customer who was impressed by the technical superiority of the W56 platform, but required a larger cargo capacity to meet their specific daily needs. Our own experience at Stables also validated the need for the longer wheel-based capable of handling a larger cubic volume.

Bob Ginnan: I want to mention that we received payment for the first 30 trucks of the previously announced purchase order of 141 trucks from a dealer in the second quarter.

I want to mention that we receive payment for the first 30 trucks of the previously announced purchase order of 141 trucks from a dealer in the second quarter.

Bob Ginnan: However, due to delays in the CARB HVIP voucher approval payment process, the dealer who was unable to deliver the trucks to the end customer by June 30th, limited the revenue recognized by the company in the second quarter.

Rick Dauk: Currently, there are three legal actions underway seeking a redress or challenge or delay in, the implementation of these California mandates designated by CARB.

Speaker Change: However, due to delays in the carb <unk> voucher approval payment process.

Rick Dauk: In addition to California, 17 other states have announced the adoption of the CARB mandates, between 2024 and 2030.

Rick Dauk: And to put this into perspective, when fully enacted, the number of Class 4-6 trucks requiring, replacement between 2024 and 2035 is more than 350,000 units.

Speaker Change: Dealer, who was unable to deliver the trucks to the end customer by June 30th limited the revenue recognized by the company in the second quarter.

Rick Dauk: This is a target-rich environment, and we are prepared with the right vehicles and the, internal production and supply capacity to secure a significant share of that demand if and when it materializes.

Rick Dauk: While compelling use case and financial returns exist, and lofty emission reduction goals, have been made by major last-mile fleet operators across the country, this pending demand has yet to translate into meaningful vehicle orders in the Class 4-6 EV medium-duty truck segment.

Rick Dauk: Let's move to Class 7 and talk about the corporate ESG commitments. Following the Paris Accord announcement, major corporations across the globe that operate, and compete in the last-mile delivery space began publicly stating and promoting their own comprehensive ESG policies. I want to share with you some of the stated policies of some of the largest last-mile, fleet operators, our core targeted customers. These policy positions are found on their respective websites.

Rick Dauk: As you can see, many are targeting net-zero carbon emissions a full decade earlier than, the Paris Accords require.

Bob Ginnan: Workhorse expects to recognize most, if not all, the $2.2 million in deferred revenue related to the sale of W4CC trucks as revenue during the remainder of 2024.

Speaker Change: We're of course expects to recognize most if not all of the $2 2 million of deferred revenue related to the sale of Adobe for Cc trucks as revenue during the remainder of 2024.

Rick Dauch: Our W56 units operating tables often cue about before they load out.

Bob Ginnan: Cost of sales decreased to $7.3 million in the second quarter compared to $8.4 million in the same period last year. The decrease in cost of sales was primarily driven by a $4.4 million decrease in costs related to direct materials as a result of lower sales volume and higher volume of vehicles being capitalized into finished goods.

Speaker Change: Cost of sales decreased by decreased to $7 3 million in the second quarter compared to $8 4 million in the same period last year.

Rick Dauch: The extended wheel-based version of the W56 will accommodate workhorses next generation step-van body.

Rick Dauch: The extended wheel-based version of the W56 will accommodate workhorses next generation step-van body. It will stand 22 feet with an impressive cargo volume of 1,200 cubic. I'm a durability testing, we'll be completing Q3 in initial production at first deliveries of this product we're expected in Q4. I also want to emphasize based on conversation with other fleets that they are indicating that the products mix could be up to 25% or greater for the 1200 cubic feet step then, which we build across the same assembly line and paint system that we currently use for the 178th wheelbase 1000 cubic feet version of the W56.

Rick Dauch: It will stand 22 feet with an impressive cargo volume of 1,200 cubic.

Speaker Change: The decrease in cost of sales was primarily driven by a $4 4 million decrease in costs related to direct materials.

Rick Dauch: I'm a durability testing, we'll be completing Q3 in initial production at first deliveries of this product we're expected in Q4.

As a result of lower sales volume and higher volume of vehicles being capitalized into finished goods.

Rick Dauch: I also want to emphasize based on conversation with other fleets that they are indicating that the products mix could be up to 25% or greater for the 1200 cubic feet step then, which we build across the same assembly line and paint system that we currently use for the 178th wheelbase 1000 cubic feet version of the W56.

Bob Ginnan: Decrease was also due to a decrease in consulting expense of $500,000, as well as a $500,000 decrease in employee compensation and related expenses, as a result of previously announced furloughs.

Speaker Change: Decrease was also due to a decrease in consulting expense of 500000 as well as a 500000 decrease in employee compensation and related expenses as a result of previously announced furloughs.

Bob Ginnan: The decrease in cost of sales was partially offset by a $2.7 million increase in inventory reserves and a $1 million increase in depreciation expense. SG&A expenses decreased to $12.1 million in the second quarter compared to $14 million in the same period last year. The decrease in SG&A expenses was primarily driven by a $2.4 million decrease in employee compensation and related expenses primarily due to the lower headcount and decrease of $600,000 in marketing expenses during the period, which was partially offset by $200,000 increase in depreciation expense and $300,000 increase in information technology costs.

Speaker Change: The decrease in cost of sales was partially offset by $2 7 million increase in inventory reserves and a $1 million increase in depreciation expense.

Rick Dauch: We continue to expand on slide 12, the dealer and service network and geographies in which customers can purchase workforce vehicles and they're working to ensure that our customers can take advantage of available centers, which vary by state and in some cases cities for economic zones within a state. California's key market as a W56, W750 and W4C, since all qualify for incentives offered by HVIP and ICIP programs. Through HVIP, vehicle purchase and participating dealers are eligible to apply for a base voucher of $85,000 per W56 purchase.

Speaker Change: SG&A expenses decreased to $12 1 million in the second quarter compared to $14 million in the same period last year.

Speaker Change: The decrease in SG&A expense was primarily driven by a $2 4 million decrease in employee compensation and related expenses, primarily due to lower head count.

Rick Dauch: California's key market as a W56, W750 and W4C, since all qualify for incentives offered by HVIP and ICIP programs. Through HVIP, vehicle purchase and participating dealers are eligible to apply for a base voucher of $85,000 per W56 purchase.

Speaker Change: Decrease of 600000 and marketing expenses during the period.

Speaker Change: Which was partially offset by 200000 increase in depreciation expense and a 300000 increase in information technology costs.

Bob Ginnan: R&D expenses decreased to $2 million in the second quarter compared to $5.1 million in the same period last year. The decrease in R&D expenses was primarily driven by a $2 million decrease in employee compensation and related expenses due to lower headcount, and a decrease in consulting expense, which was partially offset by a $400,000 increase in prototype expense driven by the W56 208-inch wheelbase program.

Speaker Change: R&D expenses decreased to $2 million in the second quarter compared to $5 1 million in the same period last year.

Rick Dauch: If the vehicle's base in ICIP zone, fleet owners can get additional incentive vouchers.

Rick Dauch: If the vehicle's base in ICIP zone, fleet owners can get additional incentive vouchers. In some cases, a fleet owner can get enough of some money to generate a payback of less than three to six months on an EV truck investment. And we continue to add dealers, including the digler truck group in Minnesota, Iowa and Wisconsin, Malia and New York City and Echo Auto in North Boston.

Speaker Change: Decrease in R&D expense was primarily driven by $2 million decrease in employee compensation related expenses due to lower head count.

Rick Dauch: In some cases, a fleet owner can get enough of some money to generate a payback of less than three to six months on an EV truck investment.

Speaker Change: And a decrease in consulting expense, which was partially offset by a 400000 dollar increase in prototype expense driven by the that'd be 56 to eight inch wheel based program.

Rick Dauch: And we continue to add dealers, including the digler truck group in Minnesota, Iowa and Wisconsin, Malia and New York City and Echo Auto in North Boston.

Bob Ginnan: Net interest was $5.2 million, including a $3 million fair value adjustment, compared to net interest income of $500,000 in the same period last year.

Speaker Change: Net interest was $5 2 million, including a $3 million fair value adjustment compared to net interest income of 500 thousands in the same period last year.

Bob Ginnan: With that, let me turn the call over to Bob to discuss our finance results and the recent steps we have taken to strengthen our financial position.

Bob Ginnan: With that, let me turn the call over to Bob to discuss our finance results and the recent steps we have taken to strengthen our financial position. Thanks Rick, let's turn to slide 13. During the quarter, we enacted additional proactive measures to conserve cash and reduce costs across the organization.

Bob Ginnan: Their value loss in the second quarter was $600,000 due to the warrants issued by the company.

Speaker Change: Fair value loss in the second quarter was 600000 due to the warrants issued by the company.

Bob Ginnan: Fair value adjustment in prior year was non-existent.

Speaker Change: The fair value adjustment in prior year was was nonexistent.

Bob Ginnan: Thanks Rick, let's turn to slide 13.

Bob Ginnan: During the quarter, we enacted additional proactive measures to conserve cash and reduce costs across the organization.

Bob Ginnan: Net loss was $26.3 million compared to $23 million in the same period last year.

Net loss was $26 3 million compared to $23 million in the same period last year.

Bob Ginnan: The continued to operate a reduced headcount and net reduction of approximately 50% of our staff through a combination of reductions, the tradition and error in the arrow of the vestiture, along with the decision to furlough 73 employees at the Union City manufacturing facility. I am pleased we have brought back 16 of those employees so far. As previously disclosed, we also undertook other cost saving initiatives including the deferral of approximately 20% of executives cash compensation into the third quarter delayed the W56 cab chassis launch and completed the vestiture of the company's arrow business along with other cost saving measures to put a finer point on the impact of these actions and other reductions.

Bob Ginnan: Turning to slide 15 to discuss our balance sheet, as of June 30, 2024, the company had $5.3 million in cash, decreased from $6.7 million quarter over quarter and $35.8 million at the end of 2023. So far this year, we invested $3.8 million in capital expenditures, primarily for the Union City plant, down from $10.5 million in the same period last year.

Speaker Change: Turning to slide 15 to discuss our balance sheet as of June 32024, The company had $5 3 million in cash.

Speaker Change: <unk> decreased from $6 7 million quarter over quarter, and a $35 8 million at the end of 2023.

Speaker Change: So far this year, we invested $3 8 million in capital expenditures, primarily for the Union City plant down from $10 5 million in the same period last year.

Bob Ginnan: I am pleased we have brought back 16 of those employees so far.

Bob Ginnan: As previously disclosed, we also undertook other cost saving initiatives including the deferral of approximately 20% of executives cash compensation into the third quarter delayed the W56 cab chassis launch and completed the vestiture of the company's arrow business along with other cost saving measures to put a finer point on the impact of these actions and other reductions.

Bob Ginnan: As we mentioned, we are taking diligent steps to strengthen our balance sheet and liquidity position so we can execute on our product roadmap and deliver for our customers.

Speaker Change: As we mentioned we are taking diligent steps to strengthen our balance sheet and liquidity position until we can execute on our product roadmap and deliver for our customers.

Bob Ginnan: We've taken significant restructuring actions and completed the development of our aero business, which allows us to 100% focus on our EV business.

Speaker Change: Taken significant restructuring actions are completed the divestiture of our air business, which allows us to 100% focus on our EV business.

Bob Ginnan: Looking ahead, we are confident in our ability to generate additional purchase orders and revenue for our customers while strengthening our financial position.

Speaker Change: Looking ahead, we are confident in our ability to generate additional purchase orders and revenue from our customers, while strengthening our financial position along with our partner in the financing side. We currently have $112 $7 million of the remaining facility available to us.

Bob Ginnan: We have reduced the cash burn rate from approximately $11 million a month to $4 million a month in just the last three months along.

Bob Ginnan: We have reduced the cash burn rate from approximately $11 million a month to $4 million a month in just the last three months along. The cheering workhorse remains listed on the national exchange significantly benefits the shareholders and business. Is there enables a wider diversity of financing options and market availability as we move forward.

Bob Ginnan: Along with our partner in the financing side, we currently have $112.7 million of remaining facility available to us.

Bob Ginnan: The cheering workhorse remains listed on the national exchange significantly benefits the shareholders and business.

Bob Ginnan: With that, let me turn it back over to Rick.

That let me turn it back over to Rick.

Rick Dauch: Thanks, Bob.

Bob Ginnan: Is there enables a wider diversity of financing options and market availability as we move forward.

Rick Doyle: Thanks, Bob Let me briefly discuss our near term priorities, which are outlined on slide 16.

Bob Ginnan: Therefore, following the stock orders approval to authorize a reverse stock split, we had acted on one for 20 reverse split and officially regained NASDAQ compliance.

Bob Ginnan: Therefore, following the stock orders approval to authorize a reverse stock split, we had acted on one for 20 reverse split and officially regained NASDAQ compliance. Turning now to highlights from quarter on slide 14, during the second quarter we continue to take steps to extend our operational runway and manage our cash flow efficiently. We had additional successful financing this quarter and continue our discussion with parties related to the sale lease factor in action for a union to the facility.

Rick Dauch: Let me briefly discuss our near-term priorities, which are outlined on slide 16.

Rick Doyle: Simply put our key strategic priorities remain one securing new orders.

Rick Dauch: Simply put, our key strategic priorities remain, one, securing new orders, to delivering world-class products and services to more customers, and 3, advancing our product portfolio roadmap.

Rick Doyle: To delivering world class products and services to customers and three advancing our product portfolio roadmap.

Bob Ginnan: Turning now to highlights from quarter on slide 14, during the second quarter we continue to take steps to extend our operational runway and manage our cash flow efficiently.

Rick Dauch: To do that, we need to continue to find ways to effectively finance the company until we can reach volumes that allow us to achieve breakeven free cash flow in the future.

Speaker Change: You do that we need to continue to find ways to effectively finance the company until we can reach volumes allow us to achieve breakeven free cash flow in the future.

Bob Ginnan: We had additional successful financing this quarter and continue our discussion with parties related to the sale lease factor in action for a union to the facility.

Rick Dauch: We hope to see the benefits from California's hybrid and zero-emission truck and voucher program, the HVIF vouchers, and other government incentives to increase number as we work through the balance of 2024, which along with federal and other state emission requirements should drive EV sales.

Speaker Change: We hope to see the benefits from California's hybrid and zero emission trucking voucher program, the HFF vouchers and other government incentives to increase number as we work through the balance of 2024.

Bob Ginnan: The recent activity reinforces our optimism about our ability to drive additional purchase orders this year and grow our revenues.

Bob Ginnan: The recent activity reinforces our optimism about our ability to drive additional purchase orders this year and grow our revenues. Sales net of returns and allowances from the second quarter of 2024 or 800,000 compared to 4 million in the same period last year. The decrease in sales of primarily due to lower W4CC vehicle sales compared to the same period a year ago, which was partially offset by an increase in other service revenue generated from operating the staples by Workhorse Road.

Speaker Change: Along with federal and other state of mission requirements should drive E B sales.

Bob Ginnan: Sales net of returns and allowances from the second quarter of 2024 or 800,000 compared to 4 million in the same period last year. The decrease in sales of primarily due to lower W4CC vehicle sales compared to the same period a year ago, which was partially offset by an increase in other service revenue generated from operating the staples by Workhorse Road.

Rick Dauch: To get the transition to EV commercial vehicles underway, this is critical to small fleet owners like those that KTS is serving out in California.

Speaker Change: The transition to EV commercial vehicles underway. This is critical to small fleet owners like those that kgs is serving out in California.

Rick Dauch: We do believe that at least one or two larger national fleets are committed and have board-approved CapEx plans to move forward on their EV plans, specifically in California and along the I-5 corridor in 2024 and 2025.

Speaker Change: We do believe that at least one or two larger national police are committed and have board approved capex plans to move forward on their E V plants, specifically in California, and along the I five corridor in 2024 and 'twenty five.

Bob Ginnan: And drones of the service revenue before the divastiture and other service revenue.

Bob Ginnan: And drones of the service revenue before the divastiture and other service revenue. I want to mention that we received payment for the first 30 trucks of the previously announced purchase order of 141 trucks from a dealer in the second quarter. However, due to delays in the car of each of the voucher approval payment process, the dealer was unable to deliver the trucks to the encustom by June 30, limiting the revenue recognized by the company in the second quarter.

Rick Dauch: In addition, we believe the government-funded police in California, the Pacific Northwest, and in select cities in the Northeast are looking to place orders yet this year or in early 2025 for the first tranche of Class 4-6 EV trucks.

Speaker Change: In addition, we believe the government funded police in California, the Pacific Northwest and in select cities in the northeast are looking to place orders yet this year or early 2025 for the first tranche of class four six EV trucks.

Bob Ginnan: I want to mention that we received payment for the first 30 trucks of the previously announced purchase order of 141 trucks from a dealer in the second quarter. However, due to delays in the car of each of the voucher approval payment process, the dealer was unable to deliver the trucks to the encustom by June 30, limiting the revenue recognized by the company in the second quarter.

Rick Dauch: Finally, we continue to have meaningful discussions with federal agencies on both product demonstrations and pilot purchase orders.

Speaker Change: Finally, we continue to have meaningful discussions with federal agencies on both product demonstration and pilot purchase orders.

Bob Ginnan: Workhorse expects to recognize most of not all the 2.2 million in deferred revenue related to sales of W4CC trucks as revenue during the remainder of 2024.

Bob Ginnan: Workhorse expects to recognize most of not all the 2.2 million in deferred revenue related to sales of W4CC trucks as revenue during the remainder of 2024. Cost of sales decreased by the decrease 27.3 million in the second quarter compared to 8.4 million in the same period last year. The decrease in cost of sales with primarily driven by a 4.4 million decrease in cost related to direct materials is a result of lower sales volume.

Rick Dauch: We continue to see increased interest in the W5-6 and, to a lesser degree, the W4-CC, as more and more of our vehicles are hitting the road, demonstrating to new and existing customers the value and reliability of workforce vehicles, and how that compares to earlier versions of EV products that they experienced that had very disappointing early results. The W5-6 is a true workhorse, designed to withstand the workload placed on them over a 15 to 20 year lifespan.

Speaker Change: We continue to see increased interest in the W. Five six and to a lesser degree the W. For CEC as more and more of our vehicles are hitting the road demonstrating to new and existing customers the value and reliability of workhorse vehicles.

Bob Ginnan: Cost of sales decreased by the decrease 27.3 million in the second quarter compared to 8.4 million in the same period last year. The decrease in cost of sales with primarily driven by a 4.4 million decrease in cost related to direct materials is a result of lower sales volume. And higher volume of vehicles being capitalized into finished goods.

That compares to earlier versions of the products that they experienced that had very disappointing early results.

Speaker Change: The W. 56 is a true workhorse designed to withstand the workload placed on them over a 15 or 20 year lifespan.

Bob Ginnan: And higher volume of vehicles being capitalized into finished goods. Decrease was also due to a decrease in consulting expense of 500,000 as well as a 500,000 decrease in employee compensation and related expenses as a result of previously announced furloughs. The decrease in cost of sales was partially offset by 2.7 million increase in inventory reserves at a 1 million increase in depreciation expense. SGA expenses decreased to 12.1 million in the second quarter compared to 14.9 in the same period last year.

Rick Dauch: Our challenge right now is converting potential customer interests into tangible, firm orders.

Speaker Change: Our challenge right now is it converting potential customer interest into tangible for motors.

Bob Ginnan: Decrease was also due to a decrease in consulting expense of 500,000 as well as a 500,000 decrease in employee compensation and related expenses as a result of previously announced furloughs.

Rick Dauch: As we navigate the current market environment, we are focused on extending our financial runway in order to emerge as a leader in the class 4-6 segment.

Speaker Change: As we navigate the current market environment, we are focused on extending our financial runway in order to emerge as a leader in the class four six segment.

Bob Ginnan: The decrease in cost of sales was partially offset by 2.7 million increase in inventory reserves at a 1 million increase in depreciation expense.

Rick Dauch: HEW has been an excellent financial partner for us as we work through our extended startup period and as we await the ramp up in future EV demand.

T. W: T. W has been excellent financial partner for Us as we work through our extended startup period.

T. W: We await the ramp up in future EV demand.

Rick Dauch: As we look ahead to the remainder of the year, we will continue to advance our EV product road map and work diligently to gain momentum on the revenue side of the business.

Bob Ginnan: SGA expenses decreased to 12.1 million in the second quarter compared to 14.9 in the same period last year. The decrease in SGA expenses primarily driven by a 2.4 million decrease in employee compensation and related expenses primarily due to lower head job and decrease of 600,000 in marketing expenses during the period, which was partially offset by 2,000 increase in depreciation expense and a 300,000 increase in information technology costs.

T. W: As we look ahead to the remainder of the year, we will continue to advance our product roadmap and worked diligently to gain momentum on the revenue side of the business.

Bob Ginnan: The decrease in SGA expenses primarily driven by a 2.4 million decrease in employee compensation and related expenses primarily due to lower head job and decrease of 600,000 in marketing expenses during the period, which was partially offset by 2,000 increase in depreciation expense and a 300,000 increase in information technology costs. R&D expenses decreased to 2 million dollars in the second quarter compared to 5.1 million in the same period last year. The decrease in R&D expenses primarily driven by 2 million decrease in employee compensation related expenses due to lower head count and a decrease in consulting expense, which was partially offset by $400,000 increase in prototype expense driven by the W56208 intrial based program.

Rick Dauch: We have multiple multifunctional teams on the road this week in California and Washington State, meeting with key fleets, our dealers, and attending a green truck summit in Tacoma, Washington.

We have multiple multifunctional teams on the road this week in California, and Washington State. Many with key fleets are dealers and attending a green trucks summit in Tacoma, Washington.

Rick Dauch: We look forward to providing updates as we make progress on the sales side of our business with specific customers.

T. W: We look forward to providing updates as we make progress on the sales side of our business with specific customers.

Rick Dauch: Being a pioneer in the commercial EV space is hard work, and we need both industry and government leaders to live up to their public commitments on addressing CHG emissions.

T. W: Being a pioneer in the commercial each space is hard work and we need to both and we need both industry and government leaders to live up to their public commitments on addressing <unk> emissions.

Bob Ginnan: R&D expenses decreased to 2 million dollars in the second quarter compared to 5.1 million in the same period last year. The decrease in R&D expenses primarily driven by 2 million decrease in employee compensation related expenses due to lower head count and a decrease in consulting expense, which was partially offset by $400,000 increase in prototype expense driven by the W56208 intrial based program.

Rick Dauk: 2040 is only 16 years away, which means these fleets must start making the transition soon, if they are to really accomplish the stated objectives on CHG emission reduction.

Rick Dauch: Most importantly, we need the large last mile police to make the hard, yet financially smart decision, to start the transition to EV commercial vehicles.

T. W: Most importantly, we need the large last mile fleets to make the hard yet financially smart decision to start their transition to EV commercial vehicles to generate revenue and establish a viable business here at workhorse, we need customers to buy trucks.

Rick Dauch: To generate revenue and establish a viable business here at Workhorse, we need customers to buy trucks.

Rick Dauk: We have spoken or met with every one of these companies on this shortlist and have conducted, successful product demonstrations with several of them.

Rick Dauk: There is a wide range in operational and capital planning and investment decision-making underway, amongst these fleets. Some fleets, like Amazon and DHL, are focused on using smaller Class 3 step bands.

Kevin: Now we'll open up the call for questions and I'll turn it over to Kevin.

Rick Dauk: That's not where we play.

Now we will open up the call for questions and I'll turn it over to Kevin.

Bob Ginnan: Net interest was 5.2 million including a $3 million fair value adjustment compared to net interest income of 500,000 in the same period last year.

Bob Ginnan: Net interest was 5.2 million including a $3 million fair value adjustment compared to net interest income of 500,000 in the same period last year. Fair value loss on the second quarter was 600,000 due to the warrants issued by the company. Fair value adjustment in prior year was not existed.

Kevin: Thank you.

Kevin: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Rick Dauk: Most of the others, though, have fleets that are heavily populated with what we call the, P1000 version of step bands, and that is exactly where we play with the W5-6, the Class 5-6 step band segment.

Rick Dauk: Many of these fleets, dating back to 2017-18, have had mixed results with early adoption, of EV-powered vehicles to include range issues, especially in severe weather conditions, payload capacity issues, system durability issues, spare parts availability, service delays, and in some extreme cases, thermal events on early versions of EV trucks.

Kevin: We will now be conducting a question and answer session.

Rick Dauk: We have heard, and in some cases, we have witnessed their stories at fleet customers.

Bob Ginnan: Fair value loss on the second quarter was 600,000 due to the warrants issued by the company.

Kevin: Information tone will indicate your line is in the question queue. As a reminder, we ask you. Please ask one question. One follow up then return to the queue and Thats star one to be placed into question queue.

Bob Ginnan: Fair value adjustment in prior year was not existed.

Bob Ginnan: Net loss was 26.3 million compared to 23 million in the same period last year.

Bob Ginnan: Net loss was 26.3 million compared to 23 million in the same period last year. Turning to slide 15 to discuss our balance sheet as a June 30, 2024, the company had 5.3 million in cash which decreased from 6.7 million quarter of a quarter and a 35.8 million at the end of 2023. So far this year we invested 3.8 million in capital expenditures primarily for the Union City Plan down from 10.5 million in the same period last year, last year.

Kevin: If you would like to be placed into the question queue, please press star 1 on your telephone keypad.

Kevin: A confirmation tone will indicate your line is in the question queue.

Rick Dauk: The result is that many industry players are moving slowly and cautiously into the zero-emission, technology transition.

Bob Ginnan: Turning to slide 15 to discuss our balance sheet as a June 30, 2024, the company had 5.3 million in cash which decreased from 6.7 million quarter of a quarter and a 35.8 million at the end of 2023.

Speaker Change: First question is coming from Craig Irwin from Roth Capital Partners. Your line is now live.

Kevin: As a reminder, we ask that you please ask one question, one follow-up, then return to the queue.

Rick Dauk: This generational technology transition will not happen overnight, as many industry pundits, predicted and forecasted back in 2018 and 2021.

Rick Dauk: It is costly, and there are many hurdles that will still need to be overcome, specifically, affordability, which is mostly driven by battery costs, which most battery components are coming from offshore, and the installation of adequate EV charging infrastructure.

Rick Dauk: For the larger fleets, we are talking about multi-billions of CapEx investments over multiple, sites over a period of up to a decade or more.

Kevin: And that is star 1 to be placed into question queue.

Excellent morning, gentlemen, I wanted to ask.

Rick Dauk: We are working closely with two to three of these fleets as a potential primary vehicle, supplier going forward.

Rick Dauk: We stand ready to meet their needs and whenever they decide to undertake the investments necessary, to start their transition to EV-powered commercial vehicles.

Rick Dauk: In slide 8, I want to spend a moment to provide you a snapshot of the voucher dynamics in, the most important state in the country for EV adoption, California. You have heard me say in the past that the CARB HVIP program and enforcement of the Clean, Fleet Mandate standards are critical to the near-term success and viability of the nascent, EV commercial truck industry.

Rick Dauk: As you can see, current CARB initiatives are not achieving planned goals. Less than 2% of Class 4-6 new truck registrations have received HVIP vouchers over the last, two years, well below the 9% EV targeted for fleet operators in 2025.

Craig Irwin: A question about the balance sheet so.

Rick Dauk: Currently, CARB has not yet leveled penalties on fleets for failing to meet ACF mandates. Until the legal challenges of the CARB mandates are resolved and fines start being leveled, for fleets failing to meet the mandates, many fleets are simply taking a wait-and-see attitude towards investing in charging stations and EV trucks.

Rick Dauk: Moving to slide 10 and turning to our commercial vehicle programs.

Rick Dauk: Our focus has been on identifying those fleets that are not waiting and have approved investment, plans to move forward in 2024 and 2025 to include Mission Linen, Vestas, and one of the largest global blast-mile fleets in the world.

Rick Dauk: All three of these companies have successfully demonstrated they are capable of the W5-6, on their actual routes in California and two other states, and two of these companies have already placed orders with us, and we are working hard to secure an order from the third fleet.

Craig Irwin: At the end of the June quarter, you showed 46, and a half and inventory.

Rick Dauk: I want to spend a moment on slide nine to talk about our own Stables by Workhorse program, as we are one of only a handful of third-party contractors across the country that has actually successfully executed an ICE to EV fleet transition in the past two, three years on our own nickel. I'd like to share with you some of the key data we are able to share with fleet customers, based on our real-world results after executing our own fleet electrification efforts. Our goal was to operate our fleet of EVs alongside our ICE fleet and compare the total cost of, ownership, TCO, with the ACT Research ICE to EV model.

Bob Ginnan: So far this year we invested 3.8 million in capital expenditures primarily for the Union City Plan down from 10.5 million in the same period last year, last year.

Rick Dauk: The real-world results we achieved on our own FedEx routes here in Ohio confirmed the, ACT model's prediction with a payback period of less than five years without any state-level attendance or grants, and in fact, we found actual TCO of 1.7 times the model prediction when dealing with the oldest, meaning age, maintenance, and test trucks, which reflected large percentage of the set bans on the road at the largest fleets in North America today.

Rick Dauk: The bottom line is that there is a financial business case to be made by transitioning, EV trucks in the commercial work truck segment, even without incentives.

Rick Dauk: On the lower left side of the slide, we summarized the real-world results ranges from our stables, operations, and this data tracks what we are seeing in our demo truck deployments for last-mile fleet operators at multiple customers. The savings are real, and we use this data during our discussion with the aforementioned, fleets and targeted customers.

Rick Dauk: Our own experience here in Ohio is stable, and during 4-6 customer demos across the country, in California, Tennessee, Ohio, Connecticut, and Massachusetts, validate these facts.

Rick Dauk: We often only charge our trucks every other day or every third day, except during extreme, hot or cold weather situations.

Rick Dauk: We continue to gain traction and positive feedback from customers, mostly for small, initial purchase orders.

Speaker Change: Can you maybe talk about how much of that is finished goods and you know roughly how many trucks does this represent.

Rick Dauk: In one demo on a route that averaged less than 25 to 30 miles per day in a city environment, the W5-6 only needed to be charged one time per week.

Rick Dauk: In ongoing commercial discussions with larger fleets on future truck orders tied to their, investment and installation of adequate EV charging systems infrastructure with lead times of 3 to 12 months.

Rick Dauk: So our trucks performed very well out in the field.

Rick Dauk: In addition to the KTS purchase order, we also progress across a number of new commercial, partnerships, including delivery of a W4CC box truck to McAbee Trucking following a successful field demonstration.

Rick Dauk: This electric vehicle is set to perform a 120-mile daily round-trip mail route between, Blacksburg, South Carolina, and Shelby, North Carolina, in support of the U.S. Postal Service.

Bob Ginnan: As we mentioned, we are taking diligence steps to strengthen our balance sheet in the equity position until we can execute on our product roadmap and deliver for our customers.

Bob Ginnan: As we mentioned, we are taking diligence steps to strengthen our balance sheet in the equity position until we can execute on our product roadmap and deliver for our customers. We've taken significant restructure and actions that completed the development of our Arab business, which allows us to 100% focus on our EV business. Looking ahead, we are confident our ability to generate additional purchase orders and revenue for our customers while strengthening our financial position. Along with our partner in the financing site, we currently have 112.7 million of remaining facilities available to us.

Rick Dauk: This is our first win with a third-party contractor for a U.S.

Speaker Change: And I assume.

Speaker Change: The third is now not on there anymore, but you will have CNC.

Bob Ginnan: We've taken significant restructure and actions that completed the development of our Arab business, which allows us to 100% focus on our EV business.

Kevin: Our first question is coming from Craig Irwin from Rose Capital Partners.

Speaker Change: Trucks on the balance sheet, if you could maybe update us on where you stand there.

Speaker Change: That would be really helpful. Thank you.

Bob Ginnan: Looking ahead, we are confident our ability to generate additional purchase orders and revenue for our customers while strengthening our financial position.

Rick Dauk: Postal Service.

Craig Irwin: Your line is now live.

Craig Irwin: Sure Craig.

Rick Dauk: We also announced the delivery of a W5-6 step van as part of an ongoing collaboration with, NorCal Transport in Richmond, California, just outside of San Francisco. NorCal is a West Coast innovator and last-mile package delivery contractor, which will serve, as another example of real-world EV performance.

Craig Irwin: Excellent.

Craig Irwin: So basically as a rough breakdown of that probably $20 million to $24 million is finished trucks about $12 million is batteries and then the rest relates to party parts that are primarily associated with the W. 56.

Craig Irwin: Morning, gentlemen.

Bob Ginnan: Along with our partner in the financing site, we currently have 112.7 million of remaining facilities available to us.

Craig Irwin: I wanted to ask a question about the balance sheets.

Craig Irwin: So at the end of the June quarter, you showed 46 and a half in inventory.

Craig Irwin: Can you maybe talk about how much of that is finished goods?

Rick Dauch: With that, let me turn it back over to Rick.

Rick Dauch: With that, let me turn it back over to Rick. Thanks, Bob.

Rick Dauch: Thanks, Bob.

Rick Dauch: Let me briefly discuss our near-term priorities, which are outlined on slide 16.

Rick Dauch: Let me briefly discuss our near-term priorities, which are outlined on slide 16. Simply put, our key research priorities remain one, securing new orders, two, delivering world-class products and services to more customers, and three, advancing our product portfolio roadmap. To do that, we need to continue to find ways to effectively finance the company until we can reach volumes that allow us to achieve break-even, free cash flow in the future. We hope to see the benefits from California's hybrid and zero-mission truck and voucher program, the H5 vouchers, and other government incentives to increase number as we work through the balance of 2024, which, along with federal and other state-amission requirements, should drive EV sales.

And that's kind of the rough breakdown of that inventory.

Rick Dauch: Simply put, our key research priorities remain one, securing new orders, two, delivering world-class products and services to more customers, and three, advancing our product portfolio roadmap.

Craig Irwin: And, you know, roughly how many trucks does this represent?

Craig Irwin: And then of that 20% to $24 million in trucks probably.

Craig Irwin: $10 million is associated with the one particular purchase of ore, which I think was your question.

Craig Irwin: And I assume, Structural Balance Sheet.

Craig Irwin: If you could maybe update us on where you stand there, that would be really helpful.

Speaker Change: Okay excellent then the $4 million burn a months.

Rick Dauch: To do that, we need to continue to find ways to effectively finance the company until we can reach volumes that allow us to achieve break-even, free cash flow in the future.

Craig Irwin: Thank you.

Speaker Change: The second thing I wanted to ask about so you know.

Speaker Change: That's nice progress I'm really focusing down on you.

Rick Dauch: We hope to see the benefits from California's hybrid and zero-mission truck and voucher program, the H5 vouchers, and other government incentives to increase number as we work through the balance of 2024, which, along with federal and other state-amission requirements, should drive EV sales.

Speaker Change: You know what you need to do to execute.

Speaker Change: The short term and then in the medium term I guess.

Speaker Change: You know in that $4 million burn of months.

Speaker Change: Do you have the capacity and me we respond to the RFP out there from the post office I understand there's a 10000 unit RF.

Rick Dauch: To get the transition to EV commercials vehicles underway, this is critical to small fleet owners like those that KTS is serving out in California.

Rick Dauch: To get the transition to EV commercials vehicles underway, this is critical to small fleet owners like those that KTS is serving out in California. We do believe that at least one or two larger national police are committed and have board approved CAPEX plans to move forward on their EV plans, specifically in California and along the I-5 quarter in 2024 and 25. In addition, we believe the government funded police in California, the Pacific Northwest, and in select cities in the Northeast, are looking to place orders yet this year, or in early 2025, for the first tranche of Class 46 EV trucks.

Speaker Change: RFP.

Speaker Change: Responding to that need to be an incremental expense for you.

Rick Dauch: We do believe that at least one or two larger national police are committed and have board approved CAPEX plans to move forward on their EV plans, specifically in California and along the I-5 quarter in 2024 and 25.

Speaker Change: You know how should we expect the.

Speaker Change: The tightness of your financial controls to impact the ability to participate there.

Bob Ginnan: Sure, Craig.

Speaker Change: Oh, Hey, Rick I'll start that and then turn it over to you to address the the RFP.

Bob Ginnan: So basically, as a rough breakdown of that, probably 20 to 24 million is finished trucks, about 12 million is batteries, and then the rest relates to parts that are primarily associated with the W56.

Rick Dauch: In addition, we believe the government funded police in California, the Pacific Northwest, and in select cities in the Northeast, are looking to place orders yet this year, or in early 2025, for the first tranche of Class 46 EV trucks.

Bob Ginnan: And that's kind of the rough breakdown of that inventory.

Rick Doyle: I think from our current.

Rick Doyle: Burn rate.

Rick Doyle: We've got the capital in place that we need to produce.

Rick Doyle: The the people to produce our current orders are in place where we're a large purchase order then changes that burn rate is in the working capital required to buy the materials, so that would be the area of focus.

Rick Dauch: Finally, we continue to have meaningful discussions with federal agencies on both product demonstrations and pilot purchase orders.

Rick Dauch: Finally, we continue to have meaningful discussions with federal agencies on both product demonstrations and pilot purchase orders. We continue to see increased interest in the W56 and to a lesser degree, the W4CC. As more and more of our vehicles are hitting the road, demonstrating to new and existing customers the value and reliability of workforce vehicles. And how that compares to earlier versions of EV products that they experienced that had very disappointing early results.

Rick Dauch: We continue to see increased interest in the W56 and to a lesser degree, the W4CC.

Rick Doyle: For that and of course, we're very focused on our roadmap in terms of where our R&D dollars are going right. Now. So if it was something that would require a diversion away from that then obviously that would be incurred.

Craig Irwin: And of that 20 to 24 million trucks, probably 10 million is associated with the one particular purchase order, which I think was your question.

Rick Dauch: As more and more of our vehicles are hitting the road, demonstrating to new and existing customers the value and reliability of workforce vehicles.

Craig Irwin: Okay, okay, excellent.

Craig Irwin: Then the $4 million burn a month was the second thing I wanted to ask about.

Rick Dauch: And how that compares to earlier versions of EV products that they experienced that had very disappointing early results.

Rick Doyle: Cash spend as well as far as the rest of the process, Rick I'll turn that over to you where you stand.

Rick Dauch: The W56 is a true workhorse designed to withstand the workload placed on them over a 15-20-year lifespan.

Rick Dauch: The W56 is a true workhorse designed to withstand the workload placed on them over a 15-20-year lifespan. Our channel right now is converting potential customer interests into tangible firm orders. As we navigate the current market environment, we are focused on extending our financial runway in order to emerge as a leader in the Class 46 segment. HEW has been an excellent financial partner for us as we work through our extended startup period and as we await the ramp up in future EV demand.

Craig Irwin: So, you know, that's nice progress, really focusing down on, you know, what you need to do to execute in the short term and in the medium term, I guess.

Rick Doyle: Yeah. It's a good question Craig in terms of it and as these potential bigger orders come in whether it's from U S. Postal service or other fleets, who will have to address as Bob said the need to bring in working capital to build the trucks, whether we can get down payments to help do that or we have to go out.

Rick Dauch: Our channel right now is converting potential customer interests into tangible firm orders.

Rick Dauch: As we navigate the current market environment, we are focused on extending our financial runway in order to emerge as a leader in the Class 46 segment.

Speaker Change: We have blue chip customers and secure an ABL somehow to do that we could talk about that let me start with when I got here in 2021 as you remember workhorse had sued the U S. Postal service, we quickly dropped that lawsuit and we've worked the last three years to get back in the good graces and that's that RFP is issued I think will beyond the bid list it'll be our job to go out and earn.

Craig Irwin: In that $4 million burn a month, do you have the capacity to maybe respond to the RFP out there from the post office?

Rick Dauch: HEW has been an excellent financial partner for us as we work through our extended startup period and as we await the ramp up in future EV demand.

Craig Irwin: I understand there's a 10,000-unit RFP.

Rick Dauch: As we look ahead to the remainder of the year, we will continue to advance our EV product roadmap and work diligently to gain momentum on the revenue side of the business.

Rick Dauch: As we look ahead to the remainder of the year, we will continue to advance our EV product roadmap and work diligently to gain momentum on the revenue side of the business. We have multiple multi-functional teams on the road this week in California and Washington State, meaning with key fleets, our dealers and attending a green truck summit in Tacoma, Washington. We look forward to providing updates as we make progress on the sales side of our business with specific customers, being a pioneer in the commercial eD space is hard work and we need to both and we need both industry and government leaders to live up to the public commitments on addressing CHG emissions.

Craig Irwin: Would responding to that maybe be an incremental expense for you?

Craig Irwin: How should we expect the tightness of your financial controls to impact the ability to participate?

Speaker Change: That that is true at other customers, we had other customers, who refuse even pick up or calls because of the failure of the C. 1000 way back in 2021, we amended those fences and we are in active discussions with multiple fleets on multiple size orders.

Rick Dauch: We have multiple multi-functional teams on the road this week in California and Washington State, meaning with key fleets, our dealers and attending a green truck summit in Tacoma, Washington.

Rick Dauk: It will allow us also to go head-to-head with at least two of our key competitors in the, segment, and we are confident the W5-6 step van will prove to be a more capable truck.

Rick Dauk: Based on early feedback from other fleets in California, we have successfully tested, our truck. We also entered an UpFit program with SureFitters, which offers a ship-through solution to commercial, EV customers. The partnership launched with 13 pre-configured UpFit packages available to workforce dealers, specialized for last-mile delivery and vocational trucks for W5-6 and W7-50 step vans.

Rick Dauk: Additionally, full-body packages from the Tough Lite, CMN truck beds, and Rugby are, included for the W4CC cab chassis, with additional UpFit packages to be added throughout the remainder of 2024 and beyond.

Speaker Change: And we do think that class five six based on our head to head demos with some of our competitors has proved to be a very reliable and robust capable truck.

Rick Dauch: We look forward to providing updates as we make progress on the sales side of our business with specific customers, being a pioneer in the commercial eD space is hard work and we need to both and we need both industry and government leaders to live up to the public commitments on addressing CHG emissions.

Rick Dauk: Turning to slide 11, building on the success of the W5-6, we will introduce a 200-inch, wheel-based version and have already secured orders from a customer who was impressed by the technical superiority of the W5-6 platform, but required a larger cargo capacity to meet their specific daily needs. Our own experience at Stables also validated the need for the longer wheel-based capable, of handling a larger cubic volume. Our W5-6 units operating in Stables often cube out before they load out. The extended wheel-based version of the W5-6 will accommodate workforce's next-generation, step van body. It will span 22 feet with an impressive cargo volume of 1,200 cubic.

Rick Dauk: The final durability testing will be completed in Q3, and in initial production, the first, deliveries of this product will be expected in Q4.

Rick Dauk: I also want to emphasize, based on conversations with other fleets, that they are indicating, that the product's mix could be up to 25% or greater for the 1,200 cubic feet step van, which will be built across the same assembly line and paint system that we currently use for the 178-inch wheelbase, 1,000 cubic feet version of the W56.

Rick Dauk: We continue to expand, on slide 12, the dealer and service network and geographies in which, customers can purchase Workhorse vehicles, and they are working to ensure that our customers can take advantage of available incentives, which vary by state, and in some cases, cities, or economic zones within a state. California is a key market as the W56, W750, and W4C, since all qualify for incentives, offered by HVIP and ISIP programs. Through HVIP, vehicle purchasers and participating dealers are eligible to apply for a base voucher, of $85,000 per W56 purchase. If the vehicle is based in an ISIP zone, fleet owners can get additional incentive vouchers.

Rick Dauk: In some cases, a fleet owner can get enough incentive money to generate a payback of less, than three to six months on an EV truck investment.

Rick Dauk: And we continue to add dealers, including the Ziegler Truck Group in Minnesota, Iowa, and Wisconsin, Malia in New York City, and Echo Auto in North Boston.

Speaker Change: And hopefully that converts over to P O soon.

Speaker Change: Now and the end of the year.

Bob Ginnan: Hey, Rick, I'll start that and then turn it over to you to address the RFP.

Speaker Change: Thank you for that I'll go Hot I'll go ahead and hop back in the queue.

Bob Ginnan: I think from, you know, our current burn rate, you know, we've got the capitals in place that we need to produce. The people to produce our current orders are in place where a large purchase order then, you know, changes that burn rate is in the working capital required to buy the material.

Rick Dauch: Most importantly we need the large last mile police to make the hard yet financially smart decision to start their transition at eD commercial vehicles.

Rick Dauch: Most importantly we need the large last mile police to make the hard yet financially smart decision to start their transition at eD commercial vehicles. To generate revenue and establish a viable business here at Workhorse we need customers to buy trucks.

Speaker Change: Okay.

Greg: Thanks, Greg.

Bob Ginnan: So that would be the area of focus for that.

As a reminder, that star one to be placed in the question queue.

Bob Ginnan: And of course, you know, we're very focused on our roadmap in terms of where our R&D dollars are going right now.

Bob Ginnan: So if it was something that would require a diversion away from that, then obviously that would be an incremental cash spend as well.

Greg: Our next question is coming from my Suski from D. A Davidson your line is now life.

Rick Dauch: To generate revenue and establish a viable business here at Workhorse we need customers to buy trucks.

Bob Ginnan: As far as the rest of the process, Rick, I'll turn that over to you or Stan.

Rick Dauk: With that, let me turn the call over to Bob to discuss our financial results and the recent

my Suski: Yes, hi, good morning, Thanks for taking my questions.

Kevin: Now we'll open up the call for questions and I'll turn it over to Kevin.

Rick Dauk: steps we have taken to strengthen our financial position.

Bob Ginnan: Thanks, Rick.

my Suski: I guess I wanted to first ask about the pipeline.

Kevin: Thank you and I'll be conducting a question and answer session.

Operator: Thank you and I'll be conducting a question and answer session. If you'd like to be placed in the question queue please press star one under telephone keypad. A confirmation tone will indicate your line is in the question queue. As a reminder we ask you please ask one question one follow up then return to the queue and that's star one to be placed into question queue.

Kevin: If you'd like to be placed in the question queue please press star one under telephone keypad.

Speaker Change: Customers going into 2025.

Speaker Change: Given what you've signed now I would imagine if you haven't done anything by September.

Bob Ginnan: Let's turn to slide 13.

Bob Ginnan: During the quarter, we enacted additional proactive measures to conserve cash and reduce, costs across the organization. We continue to operate a reduced headcount, a net reduction of approximately 50% of our, staff through a combination of reductions, attrition, and the error of divestiture, along with the decision to furlough 73 employees at the Union City Manufacturing Facility.

Kevin: A confirmation tone will indicate your line is in the question queue.

Bob Ginnan: I am pleased we have brought back 16 of those employees so far.

Bob Ginnan: As previously disclosed, we also undertook other cost-saving initiatives, including the, deferral of approximately 20% of executives' cash compensation into the third quarter, delayed the W56 cab chassis launch, and completed the divestiture of the company's aero business, along with other cost-saving measures. To put a finer point on the impact of these actions and other reductions, we have reduced, the cash burn rate from approximately $11 million a month to $4 million per month in just the last three months alone.

Bob Ginnan: Ensuring workhorse remains listed on the National Exchange significantly benefits the shareholders, and business, as it enables a wider diversity of financing options and market availability as we move forward.

Bob Ginnan: Therefore, following the stockholders' approval to authorize a reverse stock split, we enacted, a 1-for-20 reverse split and officially regained NASDAQ compliance.

Kevin: As a reminder we ask you please ask one question one follow up then return to the queue and that's star one to be placed into question queue.

Speaker Change: There won't be much to ship in the first part of 2025 I'm just curious to see.

How much you've got in the pipeline at least in the pound pages of being of being of being signed to kind of get onto the road in the first part of next year.

Craig Irwin: Our first question is coming from Craig Irwin from World Capital Partners.

Craig Irwin: Our first question is coming from Craig Irwin from World Capital Partners. Sure a lot is that live. Excellent.

Craig Irwin: Sure a lot is that live.

Craig Irwin: Excellent.

Craig Irwin: Morning gentlemen I wanted to ask a question about the balance sheet.

Bob Ginnan: Morning gentlemen I wanted to ask a question about the balance sheet. So at the end of the June quarter you showed 46 and a half in inventory. Can you maybe talk about how much of that is finished goods and you know roughly how many trucks does this represent and I assume the third difference is not on there anymore but you will have CNC trucks on the balance sheet if you can maybe update us on where you stand there that would be really helpful.

Rick Dauch: Yeah, it's a good question, Craig, in terms of as these potential bigger orders come in, whether it's from U.S.

Yeah. Good question, Mike we have two orders in house right now for about 30 trucks, which we have some of those built and then there's gotta go through the update process.

Rick Dauch: Postal Service or other fleets, we'll have to address, as Bob said, that our need to bring in working capital to build the trucks, whether we can get down payments to help do that, or we have to go out.

Bob Ginnan: Turning now to highlights from the quarter on slide 14.

Bob Ginnan: In the second quarter, we continue to take steps to extend our operational runway and, manage our cash flow efficiently.

Bob Ginnan: We had additional successful financing this quarter and continue our discussion with parties, related to the sale-leaseback transaction for our Union City facilities.

Bob Ginnan: So at the end of the June quarter you showed 46 and a half in inventory.

Speaker Change: Those are for Wi Fi 6208, 15 or for the W. 178, right now.

Bob Ginnan: Can you maybe talk about how much of that is finished goods and you know roughly how many trucks does this represent and I assume the third difference is not on there anymore but you will have CNC trucks on the balance sheet if you can maybe update us on where you stand there that would be really helpful.

Rick Dauch: If we get blue chip customers and secure an ABL somehow to do that, we can talk about that.

Bob Ginnan: Recent activity reinforces our optimism about our ability to drive additional purchase orders, this year and grow our revenues.

Speaker Change: We have additional pending orders that would have trucks shipped either late this year early next year, depending on what the upset conditions are okay.

Rick Dauch: Let me start with, when I got here in 2021, as you remember, Workhorse had sued the U.S. Postal Service.

Bob Ginnan: Sales net of returns and allowances for the second quarter of 2024 were $800,000 compared, to $4 million in the same period last year. The decrease in sales was primarily due to lower W4CC vehicle sales compared to the same, period a year ago, which was partially offset by an increase in other service revenue generated from operating the stables by Workhorse Road and drones as a service revenue before the divestiture and other service revenue.

Rick Dauch: We quickly dropped that lawsuit, and we've worked the last three years to get back in good graces, and as that RFP is issued, I think we'll be on the bid list.

Bob Ginnan: I want to mention that we received payment for the first 30 trucks of the previously, announced purchase order of 141 trucks from a dealer in the second quarter. However, due to delays in the CARB HVIP voucher approval payment process, the dealer was unable, to deliver the trucks to the end customer by June 30th, limiting the revenue recognized by the company in the second quarter.

Bob Ginnan: Workhorse expects to recognize most, if not all, of the $2.2 million in deferred revenue, related to the sale of W4CC trucks as revenue during the remainder of 2024.

Bob Ginnan: As we mentioned, we are taking diligent steps to strengthen our balance sheet and liquidity, position so we can execute on our product roadmap and deliver for our customers.

Bob Ginnan: Cost of sales decreased to $7.3 million in the second quarter compared to $8.4 million, in the same period last year. The decrease in cost of sales was primarily driven by a $4.4 million decrease in costs, related to direct materials as a result of lower sales volume and higher volume of vehicles being capitalized into finished goods.

Bob Ginnan: We've taken significant restructuring actions that completed the development of our Aero, business, which allows us to 100% focus on our EV business.

Bob Ginnan: Decrease was also due to a decrease in consultant expense of $500,000 as well as a $500,000, decrease in employee compensation and related expenses as a result of previously announced furloughs.

Bob Ginnan: Looking ahead, we are confident in our ability to generate additional purchase orders and, revenue from our customers while strengthening our financial position.

Bob Ginnan: The decrease in cost of sales was partially offset by a $2.7 million increase in inventory, reserves and a $1 million increase in depreciation expense.

Bob Ginnan: Along with our partner in the financing side, we currently have $112.7 million of remaining, facility available to us.

Bob Ginnan: SG&A expenses decreased to $12.1 million in the second quarter compared to $14 million, in the same period last year. The decrease in SG&A expenses was primarily driven by a $2.4 million decrease in employee, compensation and related expenses primarily due to lower headcount and decrease of $600,000 in marketing expenses during the period, which was partially offset by a $200,000 increase in depreciation expense and a $300,000 increase in information technology costs.

Speaker Change: I used to be on the board the shift group, a long time ago as I recall, a lot of the big fleets negotiate as part of their budgeting process for the following year. They start budgeting, how many trucks they'd like to buy and they button those orders in by October one and then they get approval from the board later in the year. Then you don't have trucks, you're going to build next year. So.

Bob Ginnan: R&D expenses decreased to $2 million in the second quarter compared to $5.1 million in, the same period last year. The decrease in R&D expenses was primarily driven by a $2 million decrease in employee, compensation and related expenses due to lower headcount and a decrease in consultant expense, which was partially offset by a $400,000 increase in prototype expense driven by the W56 208-inch wheelbase program.

Bob Ginnan: Net interest was $5.2 million, including a $3 million fair value adjustment compared to, net interest income of $500,000 in the same period last year. Fair value loss in the second quarter was $600,000 due to the warrants issued by the, company.

Bob Ginnan: The fair value adjustment in the prior year was nonexistent.

Bob Ginnan: Net loss was $26.3 million compared to $23 million in the same period last year.

Bob Ginnan: Turning to slide 15 to discuss our balance sheet, as of June 30, 2024, the company had, $5.3 million in cash, which decreased from $6.7 million quarter over quarter and $35.8 million at the end of 2023. So far this year, we invested $3.8 million in capital expenditures, primarily for the, Union City plant, down from $10.5 million in the same period last year.

Bob Ginnan: Thank you.

Bob Ginnan: Sure Craig.

Bob Ginnan: Thank you. Sure Craig. So basically as a rough breakdown of that probably 20 to 24 million is finished trucks about 12 million is batteries and then the rest relates to party parts that are primarily associated with the W56 and that's kind of the rough breakdown of that inventory and in of that 20 to 24 million trucks probably 10 million is associated with the one particular purchase order which I think was your question. Okay. Excellent.

Bob Ginnan: So basically as a rough breakdown of that probably 20 to 24 million is finished trucks about 12 million is batteries and then the rest relates to party parts that are primarily associated with the W56 and that's kind of the rough breakdown of that inventory and in of that 20 to 24 million trucks probably 10 million is associated with the one particular purchase order which I think was your question.

Rick Dauch: It'll be our job to go out and earn that.

Speaker Change: That's what we're working through right now we're sitting here in late August basically we hope to get some positive news on a couple of those fleets here between now and October one.

Rick Dauch: That's true with other customers.

Rick Dauch: We had other customers who refused to even pick up our calls because of the failure of the C-1000 way back in 2021. We've mended those fences, and we are in active discussion with multiple fleets on multiple size orders.

Rick Dauch: And we do think our Class 5-6, based on our head-to-head demos with some of our competitors, is proving to be a very reliable and robust capable truck.

Speaker Change: I know that one fleet, we've tested with liked our truck.

They prefer to use our chassis only and you put a body on that we've worked with two of the up bidders that do those kind of buys for that kind of fleet and another fleet asked if we would go to a lower range vehicle, but should cost less money to help them their business case, and we're working on that right now as well so most companies.

Bob Ginnan: Okay.

Bob Ginnan: Excellent.

Bob Ginnan: Then the $4 million burn a month was the second thing I wanted to ask about so you know that's nice progress really focusing down on you know what you need to do to execute in the in the short term in the in the medium term I guess you know in that $4 million burn a month do you have the capacity to maybe respond to the RFP out there from the post office to understand there's a 10,000 unit RFP you know with responding to that maybe be an incremental expense for you you know how should we expect the the the tightness of your financial controls to impact the ability to participate there.

Speaker Change: Use the delivery vehicles travel less than 100 miles a day as you know both our W. For C. C. N W 750, and the W. Five six have range of 150.

Speaker Change: So if you want a truck with less than 150 mile range, we need to go and take a battery I'll take out some of the cabling to come up with a 100.

Speaker Change: Mile range truck and that's kind of what we're working on right now is one of our variance as well. So does that help you I think that hopefully that gives you a positive that people like the truck.

Speaker Change: Those who want the W. Five six and place an order or pending orders.

Speaker Change: One of the bigger truck with more cubic feet, specifically, the industrial supply of living companies, who carry very heavy payloads and they want to bulk out those trucks CEO told me all by a lot of your trucks when the car mandate takes effect and I went almost every one of my trucks and 1200 cubic feet not 1000 cubic feet on the floor.

Bob Ginnan: I'll a Rick I'll start that and then turn it over to you to address the the RFP.

Bob Ginnan: I think from you know our current burn rate you know it it we've got the the capitals in place that we need it to produce the the people to produce our current borders are in place where where a large purchase order then you know changes that burn rate is in the working capital required to buy the materials. So that would be the area of focus for that and of course you know we're very focused on our road map in terms of where our R&D dollars are going right now so if it was something that would require diversion away from that then obviously that would be an incremental cash fund as well.

Speaker Change: Syed Big large fleet, you know who they are I won't say, who they are.

Speaker Change: <unk> said, we want only 100 mile trucks, we're going to use very few trucks that are more than 100 miles an hour experience at stables as most of our trucks travel somewhere between 50 to 80 miles a day, we do have some country routes I'll call them outside of the suburbs that go out to 100, 250 miles and we've been able to handle those routes with the W. Some 50 and the W 15.

Bob Ginnan: So that would be the area of focus for that and of course you know we're very focused on our road map in terms of where our R&D dollars are going right now so if it was something that would require diversion away from that then obviously that would be an incremental cash fund as well.

Speaker Change: With ease the only time, we had some difficulties at 125 miles or more where it got to minus 20 back at Ohio back in January and February we had a charge a couple of times there so okay.

Rick Dauch: As far as the rest of the process Rick I'll turn that over to you or do not state, again.

Bob Ginnan: As far as the rest of the process Rick I'll turn that over to you or do not state, again. Yeah, it's a good question, Craig, in terms of it, and as these potential bigger orders come in, whether it's from U.S. Postal Service or other fleets, we'll have to address this, Bob said that our need to bring in working capital to build the trucks, whether we can get down payments to help do that or we have to go out if we get blue chip customers and secure an ABL somehow to do that. We can talk about that.

Rick Dauch: Yeah, it's a good question, Craig, in terms of it, and as these potential bigger orders come in, whether it's from U.S.

Rick Dauch: And hopefully that converts over to PO soon, between now and the end of the year.

Speaker Change: Hopefully that answers your short term.

Rick Dauch: Postal Service or other fleets, we'll have to address this, Bob said that our need to bring in working capital to build the trucks, whether we can get down payments to help do that or we have to go out if we get blue chip customers and secure an ABL somehow to do that.

Craig Irwin: Thank you for that.

Speaker Change: Absolutely and I appreciate all that color.

Craig Irwin: I'll go hot.

Mike Shlisky: Our next question is coming from Mike Shlisky from D.A.

Speaker Change: I also wanted to ask you had mentioned.

Craig Irwin: I'll go ahead and hop back into you.

Mike Shlisky: Davidson, your line is now live.

Craig Irwin: Thanks, Craig.

Mike Shlisky: Yes.

Kevin: Thank you.

Mike Shlisky: Hi.

Kevin: As a reminder, that's star one to be placed into question Q.

Speaker Change: I think as you mentioned, putting a new project or a project on ice.

Mike Shlisky: Good morning.

Mike Shlisky: I should think of my question.

Mike Shlisky: I guess I wanted to first ask about the pipeline, of customers going into 2025.

Mike Shlisky: Given what you've signed now, I would imagine if you haven't signed anything by August, September, There won't be much to ship in the first part of 2025.

Speaker Change: <unk> is part of the.

Rick Dauch: We can talk about that.

Rick Dauch: Let me start with, when I got here in 2021, as you remember, Workhorse had sued the U.S. Postal Service.

Rick Dauch: Let me start with, when I got here in 2021, as you remember, Workhorse had sued the U.S. Postal Service. We quickly dropped that lawsuit, and we've worked the last three years to get back in good graces, and as that our P is issued, I think, will be on the bid list. It'll be our job. We've got to earn that. That's true at other customers. We had other customers who refuse to even pick up our calls because of the failure of the C-1000 way back in 2021.

Speaker Change: By the time to conserve cash.

Speaker Change: How much of a departure was is that vehicle.

Rick Dauch: We quickly dropped that lawsuit, and we've worked the last three years to get back in good graces, and as that our P is issued, I think, will be on the bid list.

Speaker Change: You would have been very complimentary of what youre doing or is it something kind of.

Brian: Brian knew different class.

Brian: Different times I'm, just kind of curious to see.

Mike Shlisky: Just curious to see, how much you've got in the pipeline, at least in the final stages of being signed to kind of get onto the road in the first part of.

Rick Dauch: It'll be our job.

Rick Dauch: We've got to earn that.

Rick Dauch: Yeah, good question, Mike.

Speaker Change: Great Great question, that's a copy.

Rick Dauch: That's true at other customers.

Rick Dauch: We have two orders in-house right now for about 30 trucks, which we have some of those built, and then we've got to go through the update process. There's 15 of those are for W56208, and 15 are for the W178 right now.

Rick Dauch: We do have some country routes, I'll call them, outside of the suburbs that go out to 120, 150 miles.

Rick Dauch: We have additional pending orders that would have trucks shipped either late this year or early next year, depending on what the up-to-date conditions are, okay?

Rick Dauch: We had other customers who refuse to even pick up our calls because of the failure of the C-1000 way back in 2021.

Rick Dauch: And we've been able to handle those routes with the W750 and the W56 with ease.

Rick Dauch: I used to be on the board of the shift group a long time ago.

Rick Dauch: The only time we had some difficulties at 125 miles or more, when it got to minus 20 back in Ohio back in January and February, we had to charge a couple times there, so, okay?

Rick Dauch: As I recall, a lot of the big fleets negotiate as part of their budgeting process for the following year. They start budgeting how many trucks they'd like to buy, and they button those orders in by October 1st, and then they get approval from the boards later in the year. Then you know how many trucks you're going to build next year.

Speaker Change: Okay. Yeah, it's century class five six product based on feedback from our customers who are not using step vans. Okay.

Rick Dauch: Yeah, it's a complimentary Class 5-6 product.

Rick Dauch: Hopefully that answers your question.

Rick Dauch: So that's what we're working through right now.

Mike Shlisky: Absolutely.

Rick Dauch: We're sitting here in late August, basically.

Mike Shlisky: I appreciate all that color.

Rick Dauch: We hope to get some positive news on a couple of those fleets here between now and October 1st.

Mike Shlisky: Good.

Rick Dauch: I know that one fleet we've tested with liked our truck, but they prefer to use our chassis only, and you put a body on that. We've worked with two of the upfitters that do those kind of bodies for that kind of fleet.

Rick Dauch: We've mended those fences, and we are inactive discussion with multiple fleets on multiple size orders.

Rick Dauch: We've mended those fences, and we are inactive discussion with multiple fleets on multiple size orders. And we do think our class 5-6, based on our head-to-head demos with some of our competitors, is proven to be a very reliable and robust, capable truck.

Mike Shlisky: I also wanted to ask, you had mentioned...

Rick Dauch: And another fleet asked if we would go to a lower range vehicle, which would cost less money to help them with their business case, and we're working on that right now as well.

Rick Dauch: Based on feedback from our customers, we're not using step-bans, okay, and so it just pushes out 12 to 18 months.

Mike Shlisky: I think you mentioned putting a new project or a product on ice, temporarily as part of the plan to conserve cash.

Rick Dauch: So most companies use the delivery vehicles, travel less than 100 miles a day.

Mike Shlisky: How much of a departure was in that vehicle?

Rick Dauch: As you know, both our W4CC and W750 and the W56 have ranges of 150.

Mike Shlisky: Was it something that you would have been very complimentary of what you were doing?

Rick Dauch: So if you want a truck with less than 150 mile range, we need to go in, take a battery out, take out some of the cabling, and come up with a 100 mile range truck.

Mike Shlisky: Or was it something kind of a brand new, different class, different science?

Rick Dauch: And that's kind of what we're working on right now as one of our variants as well.

Mike Shlisky: I'm just kind of curious to see.

Rick Dauch: Does that help you?

Rick Dauch: And we do think our class 5-6, based on our head-to-head demos with some of our competitors, is proven to be a very reliable and robust, capable truck.

Mike Shlisky: Yeah, great question.

Mike Shlisky: I think that, hopefully that gives you positive, hey, the people like the truck.

Rick Dauch: That's a complimentary.

Speaker Change: And so it just pushes out 12 to 18 months.

Rick Dauch: Those who want the W56 have placed an order, are pending orders.

Rick Dauch: Some wanted a bigger truck with more cubic feet, specifically the industrial supply and linen companies who carry very heavy payloads and they wanna bulk out those trucks.

Rick Dauch: I had a CEO tell me, I'll buy a lot of your trucks, when the CARB mandate takes effect, and I want almost every one of my trucks to be 1,200 cubic feet, not 1,000 cubic feet.

Rick Dauch: It's more for utility-type trucks and service trucks. So think of a W4CC vehicle on steroids, basically, a little slightly bigger.

Rick Dauch: On the flip side, big, large fleet, you know who they are, I won't say who they are, said we want only 100-mile trucks.

Speaker Change: It's more for utility type trucks and service trucks, So think of a W. For cc vehicle on steroids basically slightly bigger we see some opened opportunities out there, especially in California, and some of the utility companies that want that so we're looking at ways how different ways, how we skin that cat. The first first we have to make it through our launch and our birth and that's based on last.

Rick Dauch: We're gonna use very few trucks that are more than 100 miles. And our experience at Stables is most of our trucks travel somewhere between 50 to 80 miles a day.

Rick Dauch: And hopefully, that converts over to P.O, soon, between now and the end of the year.

Rick Dauch: And hopefully, that converts over to P.O, soon, between now and the end of the year. Thank you for that.

Rick Dauch: We see some open opportunities out there, especially in California and some of the utility companies that want that.

Craig Irwin: Thank you for that.

Craig Irwin: I'll go ahead and hop back in the queue.

Craig Irwin: I'll go ahead and hop back in the queue. Thanks, Perth.

Rick Dauch: So we're looking at different ways how we skim that cap, but first we have to make it through our launch and our birth, and that's based on last-mile delivery, use of step-bans or stripped chassis that are built into step-bans, okay?

Craig Irwin: Thanks, Perth.

Mike Sluskey: Thank you.

Mike Sluskey: As a reminder, that's star 1 to be placed in the question queue.

Operator: Thank you. As a reminder, that's star 1 to be placed in the question queue.

Speaker Change: All delivery use of step vans or strip chassis that are built in the strip for us.

Mike Sluskey: Our next question is coming from Mike Sluskey from DA David Sluskey.

Mike Shlisky: Our next question is coming from Mike Sluskey from DA David Sluskey.

Speaker Change: The step downs, okay. So so short term, we need to survive and move forward and longer term, we can get the orders in here build trucks. Then we can add that other product in the future doesn't hurt us in the near term financials, it'll help us in the long term how's that.

Mike Sluskey: What is our life?

Mike Shlisky: What is our life? Oh, yes. Hi. Good morning. I should give you my question. I guess I wanted to first ask about the pipeline of customers going into 2025. Given what you've signed now, I would imagine if you haven't signed anything by August, September, there won't be much to ship in the first part of 2025. I'm least in the final stages of being signed to kind of get on to the road in the first part of the next year.

Rick Dauch: So short-term, we need to survive and move forward, and longer-term, we can get the orders in here, build trucks, and then we can add that other product in the future.

Mike Sluskey: Oh, yes.

Mike Sluskey: Hi.

Mike Sluskey: Good morning.

Mike Sluskey: I should give you my question.

Mike Sluskey: I guess I wanted to first ask about the pipeline of customers going into 2025.

Rick Dauch: It doesn't hurt us in the near term financials, it'll help us in the long term.

Mike Shlisky: How's that?

Mike Shlisky: Absolutely.

Speaker Change: Absolutely thanks for the for the assistance I'll pass it along.

Rick Dauch: Given what you've signed now, I would imagine if you haven't signed anything by August, September, there won't be much to ship in the first part of 2025.

Mike Shlisky: Thanks for the assistance.

Mike Shlisky: I'll pass it along.

Kevin: Thank you.

Speaker Change: Thank you we reached end of our question and answer session I like to turn the floor back over for any further or closing comments.

Bob Ginnan: With that, let me turn it back over to Rick.

Rick Dauk: Thanks, Bob.

Rick Dauk: Let me briefly discuss our near-term priorities, which are outlined on slide 16.

Rick Dauk: Simply put, our key strategic priorities remain, one, securing new orders, two, delivering, world-class products and services to more customers, and three, advancing our product portfolio roadmap.

Operator: We reached the end of our

Rick Dauk: To do that, we need to continue to find ways to effectively finance the company until we, can reach volumes that allow us to achieve breakeven free cash flow in the future.

Operator: question and answer session.

Rick Dauk: We hope to see the benefits from California's hybrid and zero emission truck and voucher, program, the HVIF vouchers, and other government incentives to increase number as we work through the balance of 2024, which, along with federal and other state emission requirements, should drive EV sales.

Operator: I'd like to turn the floor back over for any further

Kevin: We reached the end of our question and answer session.

Speaker Change: No I appreciate everybody, calling in Craig and Mike I. Appreciate your questions. We're happy to have follow up calls with you and Bob its Dan later today and.

Rick Dauk: To get the transition to EV commercial vehicles underway, this is critical to small fleet, owners like those that KTS is serving out in California.

Operator: closing comments.

Rick Dauch: I'd like to turn the floor back over for any further closing, I appreciate everybody calling in.

Rick Dauk: We do believe that at least one or two larger national fleets are committed and have board-approved, CapEx plans to move forward on their EV plans, specifically in California and along the I-5 corridor in 2024 and 2025.

Rick Dauk: No I appreciate everybody calling in.

Rick Dauch: Craig and Mike, I appreciate your questions.

Rick Dauk: appreciate your questions.

Rick Dauk: In addition, we believe the government-funded fleets in California, the Pacific Northwest, and in select cities in the Northeast are looking to place orders yet this year or early 2025 for the first tranche of Class 4-6 EV trucks.

Rick Dauk: Craig and Mike I

Rick Dauch: I'm happy to have follow-up calls with you and Bob and Stan later today.

Rick Dauch: I'm least in the final stages of being signed to kind of get on to the road in the first part of the next year.

Rick Dauk: Finally, we continue to have meaningful discussions with federal agencies on both product demonstration, and pilot purchase orders.

Rick Dauk: We continue to see increased interest in the W-5-6 and, to a lesser degree, the W-4-CC, as more and more of our vehicles are hitting the road, demonstrating to new and existing customers the value and reliability of workforce vehicles and how that compares to earlier versions of EV products that they experienced that had very disappointing early results. The W-5-6 is a true workhorse, designed to withstand the workload placed on them over, a 15- to 20-year lifespan.

Rick Dauk: I'm happy to have follow-up calls with you and Bob and Stan later today and we'll keep fighting here at Workhorse to make sure that we survive and win.

Rick Dauk: Our challenge right now is converting potential customer interests into tangible firm orders.

Rick Dauk: Thanks a lot.

Rick Dauch: And we'll keep fighting here at Workhorse to make sure that we survive and win.

Rick Dauk: As we navigate the current market environment, we are focused on extending our financial, runway in order to emerge as a leader in the Class 4-6 segment.

Rick Dauk: Have a great day.

Rick Dauk: HEW has been an excellent financial partner for us as we work through our extended startup, period and as we await the ramp-up in future EV demand.

Speaker Change: We will keep fighting here at workhorse and make sure that we are surviving win thanks, a lot have a great day bye.

Rick Dauk: Bye.

Rick Dauk: As we look ahead to the remainder of the year, we will continue to advance our EV product, roadmap and work diligently to gain momentum on the revenue side of the business.

Operator: Thank you.

Rick Dauk: We have multiple multifunctional teams on the road this week in California and Washington, State, meeting with key fleets, our dealers, and attending a green truck summit in Tacoma, Washington.

Rick Dauk: We look forward to providing updates as we make progress on the sales side of our business, with specific customers.

Rick Dauch: Yeah, good question, Mike.

Rick Dauch: Yeah, good question, Mike. We have two orders in the house right now for about 30 trucks, which we have some of those built, and then we've got to go through the up-fit process. There's 15 of those for W56208 and 15 of the W178 right now. We have additional pending orders that would have truck ship either late this year or early next year, depending on what the up-fit conditions are. Okay.

Rick Dauch: Thanks a lot.

Rick Dauk: Being a pioneer in the commercial EV space is hard work, and we need both industry and, government leaders to live up to their public commitments on addressing CHG emissions.

Rick Dauch: Have a great day.

Rick Dauk: Most importantly, we need the large last-mile police to make the hard, yet financially smart, decision to start their transition to EV commercial vehicles.

Rick Dauch: We have two orders in the house right now for about 30 trucks, which we have some of those built, and then we've got to go through the up-fit process.

Operator: Bye.

Rick Dauk: To generate revenue and establish a viable business here at Workhorse, we need customers, to buy trucks.

Operator: Thank you.

Rick Dauk: Now we'll open up the call for questions, and I'll turn it over to Kevin.

Operator: You may disconnect your line at this time and have a wonderful day.

Operator: That does conclude today's teleconference webcast.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day.

Kevin: Thank you.

Operator: That does conclude today's teleconference webcast.

Kevin: We'll now be conducting a question and answer session.

Operator: You may disconnect your line at

Kevin: If you'd like to be placed into the question queue, please press star 1 on your telephone, keypad.

Kevin: A confirmation tone will indicate your line is in the question queue.

Operator: this time and have a wonderful day.

Rick Dauch: There's 15 of those for W56208 and 15 of the W178 right now.

Kevin: As a reminder, we ask that you please ask one question, one follow-up, then return to, the queue.

Kevin: And that's star 1 to be placed into question queue.

Kevin: Our first question is coming from Craig Irwin from Roth Capital Partners.

Speaker Change: Thank you for your participation today.

Craig Irwin: Your line is now live.

Craig Irwin: Excellent.

Craig Irwin: Good morning, gentlemen.

Craig Irwin: I wanted to ask a question about the balance sheet.

Rick Dauch: We have additional pending orders that would have truck ship either late this year or early next year, depending on what the up-fit conditions are.

Craig Irwin: So at the end of the June quarter, you showed 46.5 in inventory.

Craig Irwin: Can you maybe talk about how much of that is finished goods, and, you know, roughly, how many trucks does this represent?

Craig Irwin: And I assume the 30 from KTS is not on there anymore, but you will have C&C trucks on the, balance sheet.

Craig Irwin: If you could maybe update us on where you stand there, that would be really helpful.

Craig Irwin: Thank you.

Bob Ginnan: Sure, Craig.

Rick Dauch: Okay.

Bob Ginnan: So basically, as a rough breakdown of that, probably 20 to 24 million is finished trucks. About 12 million is batteries.

Mike Sluskey: I used to be on the board, the shift group a long time ago.

Rick Dauch: I used to be on the board, the shift group a long time ago. As I recall, a lot of the big fleets negotiate as part of their budgeting process for the following year. They start budgeting how many trucks they'd like to buy and they button those orders in by October 1st and then they get approval from the boards later in the year than you know how the trucks are going to go next year.

Bob Ginnan: And then the rest relates to parts that are primarily associated with the W56.

Bob Ginnan: And that's kind of the rough breakdown of that inventory.

Bob Ginnan: And of that 20 to 24 million trucks, probably 10 million is associated with the one particular, purchase order, which I think was your question.

Rick Dauch: As I recall, a lot of the big fleets negotiate as part of their budgeting process for the following year. They start budgeting how many trucks they'd like to buy and they button those orders in by October 1st and then they get approval from the boards later in the year than you know how the trucks are going to go next year.

Craig Irwin: Okay.

Craig Irwin: Excellent.

Craig Irwin: Then the $4 million burn a month was the second thing I wanted to ask about.

Craig Irwin: So, you know, that's nice progress, really focusing down on, you know, what you need, to do to execute in the short term and in the medium term, I guess.

Craig Irwin: You know, in that $4 million burn a month, do you have the capacity to maybe respond, to the RFP out there from the post office?

Craig Irwin: I understand there's a 10,000 unit RFP.

Craig Irwin: You know, would responding to that maybe be an incremental expense for you?

Craig Irwin: You know, how should we expect the tightness of your financial controls to impact the ability, to participate there?

Bob Ginnan: Hey, Rick, I'll start that and then turn it over to you to address the RFP.

Bob Ginnan: I think from, you know, our current burn rate, you know, we've got the capitals in place that we need to produce. The people to produce our current orders are in place where a large purchase order, then, you know, changes that burn rate is in the working capital required to buy the materials.

Bob Ginnan: So that would be the area of focus for that.

Bob Ginnan: And of course, you know, we're very focused on our roadmap in terms of where our R&D dollars, are going right now.

Bob Ginnan: So if it was something that would require a diversion away from that, then obviously, that would be an incremental cash spend as well.

Rick Dauk: Yeah, it's a great question, Craig, in terms of as these potential bigger orders come in, whether it's from U.S.

Rick Dauk: Postal Service or other fleets, we'll have to address, as Bob said, our need to bring in working capital to build the trucks, whether we can get down payments to help do that or we have to go out, if we get blue-chip customers and secure an ABL somehow to do that, we can talk about that.

Rick Dauk: Let me start with, when I got here in 2021, as you remember, Workhorse had sued the U.S. Postal Service.

Rick Dauk: We quickly dropped that lawsuit, and we've worked the last three years to get back in, good graces, and as that RFP is issued, I think we'll be on the bid list.

Rick Dauch: So that's what we're working through right now.

Rick Dauch: So that's what we're working through right now. We're sitting here late August, basically. We hope to get some positive news on a couple of those fleets here between now and October 1st. I know that one fleet we've tested with liked our truck, but they prefer to use our chassis only and you put a body on that. We've worked with two of the up-fitters that do those kind of bodies for that kind of fleet.

Rick Dauk: It'll be our job to go out and earn that.

Rick Dauk: That's true of other customers.

Rick Dauch: We're sitting here late August, basically.

Rick Dauk: We had other customers who refused to even pick up our calls because of the failure of, the C-1000 way back in 2021.

Rick Dauk: We've mended those fences, and we are in active discussion with multiple fleets on multiple, size orders.

Rick Dauch: We hope to get some positive news on a couple of those fleets here between now and October 1st.

Rick Dauk: And we do think our Class 5-6, based on our head-to-head demos with some of our competitors, has proven to be a very reliable and robust capable truck, and hopefully that converts over to PO soon, between now and the end of the year.

Craig Irwin: Thank you for that.

Craig Irwin: I'll go ahead and hop back into the queue.

Craig Irwin: Thanks, Kirk.

Kevin: Thank you.

Kevin: As a reminder, that's Star 1 to be placed in the question queue.

Rick Dauch: I know that one fleet we've tested with liked our truck, but they prefer to use our chassis only and you put a body on that.

Kevin: Our next question is coming from Mike Schliske from D.A.

Mike Schliske: Davidson.

Mike Schliske: Your line is now live.

Mike Schliske: Yes.

Mike Schliske: Hi.

Mike Schliske: Good morning.

Mike Schliske: I guess I wanted to first ask about the pipeline of customers going into 2025.

Mike Schliske: Given what you've signed now, I would imagine if you haven't signed anything by August, September, you know, there won't be much to ship in the first part of 2025.

Rick Dauch: We've worked with two of the up-fitters that do those kind of bodies for that kind of fleet.

Mike Schliske: I'm just curious to see how much you've got in the pipeline, at least in the final stages, of being signed, to kind of get onto the road in the first part of next year.

Rick Dauk: Yeah.

Rick Dauk: Good question, Mike.

Rick Dauk: We have two orders in-house right now for about 30 trucks, which we have some of those, built, and then we've got to go through the upfit process. There's 15 of those for a W56208, and 15 are for the W178 right now.

Rick Dauch: And another fleet asked if we would go to a lower-range vehicle which would cost less money to help them the business case, and we're working on that right now as well.

Rick Dauch: And another fleet asked if we would go to a lower-range vehicle which would cost less money to help them the business case, and we're working on that right now as well. So most companies use the delivery vehicles travel less than a hundred miles a day as you know both our W4CC and W750 and the W56 have range of 150, of the industry. So if you want a truck with less than 150 mile range, we need to go in, take a battery out, take out some of the cable, and come up with a 100 mile range truck, and that's kind of what we're working on right now is one of our variants as well.

Rick Dauk: We have additional pending orders that would have trucks shipped either late this year, or early next year, depending on what the upfit conditions are.

Rick Dauk: Okay?

Rick Dauk: I used to be on the board of the shift group a long time ago.

Rick Dauk: As I recall, a lot of the big fleets negotiate as part of their budgeting process for the, following year, they start budgeting how many trucks they'd like to buy, and they button those orders in by October 1st, and then they get approval from the boards later in the year, and then you know how many trucks you're going to build next year.

Rick Dauk: So that's what we're working through right now.

Rick Dauk: We're sitting here in late August, basically.

Rick Dauk: We hope to get some positive news on a couple of those fleets here between now and October 1st.

Rick Dauk: I know that one fleet we've tested with liked our truck, but they prefer to use our chassis, only, and you put a body on that.

Rick Dauk: We've worked with two of the upfitters that do those kind of bodies for that kind of fleet, and another fleet asked if we would go to a lower range vehicle, which would cost less money to help them with their business case, and we're working on that right now as well.

Rick Dauch: So most companies use the delivery vehicles travel less than a hundred miles a day as you know both our W4CC and W750 and the W56 have range of 150, of the industry.

Rick Dauk: So most companies use the delivery vehicles travel less than 100 miles a day.

Rick Dauk: As you know, both our W4CC and W750 and the W56 have ranges of 150, you.

Rick Dauk: So if you want a truck with less than 150 mile range we need to go in take a battery out take out some of the cabling and come up with a hundred mile range truck and that's kind of what we're working on right now is one of our variants as well.

Rick Dauk: So does that help you?

Mike Schliske: I think that hopefully that gives you positive data.

Rick Dauk: People like the truck.

Rick Dauk: Those who want the W5-6 at place and order are pending orders. Some wanted a bigger truck with more cubic feet specifically the industrial supply and linen companies who carry very heavy payloads and they want to bulk out those trucks.

Rick Dauk: I had a CEO told me I'll buy a lot of your trucks when the car mandate takes effect and I want almost every one of my trucks in 1,200 cubic feet not 1,000 cubic feet.

Rick Dauk: On the flip side big large fleet you know who they are I won't say who they are said we want only a hundred mile trucks.

Rick Dauk: We're going to use very few trucks that are more than a hundred miles and our experience at Stables is most of our trucks travel somewhere between 50 to 80 miles a day.

Rick Dauk: We do have some country routes I'll call them outside the suburbs that go out to 120, 150 miles and we've been able to handle those routes with the W750 and the W5-6 with ease.

Rick Dauk: The only time we had some difficulties at 125 miles or more when it got to minus 20 back in Ohio back in January and February.

Rick Dauk: We had a charge a couple times there so okay.

Mike Schliske: Hopefully that answers your question.

Mike Schliske: Absolutely I appreciate all that color.

Rick Dauch: So if you want a truck with less than 150 mile range, we need to go in, take a battery out, take out some of the cable, and come up with a 100 mile range truck, and that's kind of what we're working on right now is one of our variants as well.

Mike Schliske: I also wanted to ask you had mentioned I think you mentioned putting a new project or a product on ice temporarily as part of the development of cash.

Mike Schliske: How much of a departure was in that vehicle?

Mike Schliske: Was it something that you would have been very complimentary what you're, doing or was it something kind of a brand new different class different size?

Mike Schliske: I'm just kind of curious to see.

Rick Dauk: Yeah great question.

Rick Dauk: That's a complimentary class 5-6 product based on feedback from our customers who are not using step bands.

Rick Dauk: Okay and so it just pushes out 12 to 18 months.

Rick Dauk: It's more for utility type trucks and service trucks. So think of a W4CC vehicle on steroids basically a little slightly bigger.

Rick Dauk: We see some open opportunities out there especially in California and some of the utility companies that want that.

Rick Dauk: So we're looking at ways how different ways how we skin that cat.

Rick Dauk: The first first we have to make it through our launch and our birth and that's based on last mile delivery use of step bands or strip chassis that are built in the strip bus step bands.

Rick Dauk: Okay so so short term we need to survive and move forward and longer term we can get the orders in here build trucks and then we can add that other product in the future.

Rick Dauch: Does that help you?

Rick Dauch: Does that help you? I think that, hopefully that gives you positive, hey, the people like this truck, those who want the W56 at place in order, or pending orders, some wanted a bigger truck with more cubic feet, specifically the industrial supply and lending companies who carry very heavy payloads, and they want to bulk out those trucks. I had a CEO tell me, I'll buy a lot of your trucks, when the car mandate takes effect, and I want almost every one of my trucks be 1200 cubic feet, not 1000 cubic feet.

Rick Dauk: It doesn't hurt us in the near term financials. It'll help us in the long term.

Rick Dauch: I think that, hopefully that gives you positive, hey, the people like this truck, those who want the W56 at place in order, or pending orders, some wanted a bigger truck with more cubic feet, specifically the industrial supply and lending companies who carry very heavy payloads, and they want to bulk out those trucks.

Rick Dauk: How's that?

Mike Schliske: Absolutely.

Mike Schliske: Thanks for the assistance.

Mike Schliske: I'll pass it along.

Mike Schliske: Thank you.

Rick Dauch: I had a CEO tell me, I'll buy a lot of your trucks, when the car mandate takes effect, and I want almost every one of my trucks be 1200 cubic feet, not 1000 cubic feet.

Rick Dauch: On the flip side, big, large sleep, you know who they are, I won't say who they are, said we want only 100 mile trucks.

Rick Dauch: On the flip side, big, large sleep, you know who they are, I won't say who they are, said we want only 100 mile trucks. We're going to use very few trucks that are more than 100 miles. And our experience as samples is most of our trucks travel somewhere between 50 to 80 miles a day. We do have some country routes I'll call them outside of the suburbs that go out to 100, 200, 50 miles, and we've been able to handle those routes with the W750 and the W56 with ease.

Rick Dauch: We're going to use very few trucks that are more than 100 miles.

Rick Dauch: And our experience as samples is most of our trucks travel somewhere between 50 to 80 miles a day.

Rick Dauch: We do have some country routes I'll call them outside of the suburbs that go out to 100, 200, 50 miles, and we've been able to handle those routes with the W750 and the W56 with ease.

Rick Dauch: The only time we had some difficulties at 125 miles and more where it got to minus 20, back in Ohio, back in January, February.

Rick Dauch: The only time we had some difficulties at 125 miles and more where it got to minus 20, back in Ohio, back in January, February. We had a charge a couple times there, so, okay, hopefully that answers your question.

Rick Dauch: We had a charge a couple times there, so, okay, hopefully that answers your question.

Mike Sluskey: Absolutely, I appreciate all that color.

Mike Shlisky: Absolutely, I appreciate all that color. Good.

Mike Sluskey: Good.

Mike Sluskey: I also wanted to ask, you had mentioned, I think you mentioned putting new projects or a product on ice, temporarily, as part of the plant, if it's sort of cash.

Mike Shlisky: I also wanted to ask, you had mentioned, I think you mentioned putting new projects or a product on ice, temporarily, as part of the plant, if it's sort of cash. How much of the departure was, is that vehicle? Was it something that you would have been very complimentary, what you're doing? Or was it something kind of brand new, different class, different signs?

Rick Dauch: How much of the departure was, is that vehicle? Was it something that you would have been very complimentary, what you're doing?

Rick Dauch: Or was it something kind of brand new, different class, different signs?

Rick Dauch: I'm just kind of curious to see, yeah, very good, very question.

Rick Dauch: I'm just kind of curious to see, yeah, very good, very question. That's a compliment to you. Yeah, it's a complimentary class 56 product based on feedback from our customers who are not using stepbans, okay? And so it just pushes out 12 to 18 months. It's more for utility type trucks and service trucks, so think of a W4CC vehicle on steroids, basically a little slightly bigger. We see some open opportunities out there, especially in California and some of the utility companies that want that.

Rick Dauch: That's a compliment to you.

Rick Dauch: Yeah, it's a complimentary class 56 product based on feedback from our customers who are not using stepbans, okay?

Rick Dauch: And so it just pushes out 12 to 18 months. It's more for utility type trucks and service trucks, so think of a W4CC vehicle on steroids, basically a little slightly bigger.

Rick Dauch: We see some open opportunities out there, especially in California and some of the utility companies that want that.

Rick Dauch: So we're looking at ways, different ways, how we skin that cat.

Rick Dauch: So we're looking at ways, different ways, how we skin that cat. The first, first, we have to make it through our launch and our birth, and that's based on last mile delivery, use of stepbans or strip chassis that are built in the strip, stepbans, okay?

Rick Dauch: The first, first, we have to make it through our launch and our birth, and that's based on last mile delivery, use of stepbans or strip chassis that are built in the strip, stepbans, okay?

Rick Dauch: So short term, we need to survive and move forward.

Mike Shlisky: So short term, we need to survive and move forward. In longer term, we can get the orders in here, build trucks, and then we can add that other product in the future. Doesn't hurt us in the near term financials, it'll help us in the long term. How's that? Absolutely. Thanks for the assistance. I'll pass it along. Thank you.

Rick Dauch: In longer term, we can get the orders in here, build trucks, and then we can add that other product in the future. Doesn't hurt us in the near term financials, it'll help us in the long term.

Rick Dauch: How's that?

Mike Sluskey: Absolutely.

Mike Sluskey: Thanks for the assistance.

Mike Sluskey: I'll pass it along.

Mike Sluskey: Thank you.

Operator: We reached end of our question and answer session.

Rick Dauch: We reached end of our question and answer session. I just want to turn the phone back over for any further closing comments. No, I appreciate everybody calling in. Craig and Mike, I appreciate your questions. I'm happy to have follow up calls with you and Bob and stand later today. And we'll keep fighting here at Workhorse to make sure that we survive and win. Thanks a lot and have a great day. Bye.

Operator: I just want to turn the phone back over for any further closing comments.

Rick Dauch: No, I appreciate everybody calling in.

Rick Dauch: Craig and Mike, I appreciate your questions.

Rick Dauch: I'm happy to have follow up calls with you and Bob and stand later today.

Rick Dauch: And we'll keep fighting here at Workhorse to make sure that we survive and win.

Rick Dauch: Thanks a lot and have a great day.

Operator: Bye.

Operator: Thank you that does conclude today's other conference webcasts.

Operator: Thank you that does conclude today's other conference webcasts. And we disconnect the line at this time and have a wonderful day.

Operator: And we disconnect the line at this time and have a wonderful day.

Operator: We thank you for your participation today.

Q2 2024 Workhorse Group Inc Earnings Call

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