Greetings, and welcome to the Workhorse Group Q2 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Stan March, Vice President, Corporate Development and Communications. Please go ahead, Stan.

Thank you, Kevin. 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 have issued our results for the second quarter ended June 30, 2024 via press release and we filed our 10-Q last evening for that period. You can find the release and accompanying presentation on the Investor Relations section of our website. We'll be tracking along with the presentation during this call. Also joining on today's call are Rick Dauch, our CEO; and Bob Ginnan, our CFO. For today's agenda, please turn to Slide 3. 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. Our disclaimer can be found on Slide 4. 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. You can read the full disclaimer statement in our periodic filing 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 Dauch. Rick?

Thanks, Stan, and good morning, everyone. Thank you for taking the time to join us today. 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. 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. 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. 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're 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 W56 and new state level government centers and subsidies that encourage EV adoption long-term. I believe we are doing everything we can to position Workhorse to capture future commercial fleet demand. Most…

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. We continue to operate at reduced headcount, a net reduction of approximately 50% of our staff through a combination of reductions, attrition and in the Aero divestiture, 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 executive 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. 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. Therefore, following the stockholders' approval to authorize a reverse stock split, we had enacted a 1 for 20 reverse split and officially regained NASDAQ compliance. 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. We had additional successful financing this quarter and continuing our discussions with parties related to the sale-leaseback transaction for our Union City facility. 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 for the second quarter of 2024…

Thanks Bob. Let me briefly discuss our near-term priorities, which are outlined on Slide 16. 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 road map. 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. We hope to see the benefits from California's hybrid and zero-emission truck and voucher program, the HVIP 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. 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. 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 plants, specifically in California and along the I-5 quarter in 2024 and '25. 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 in early 2025, for the first tranche of Class 4-6 EV trucks. 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 W4 CC. As more and more of our vehicles are hitting the road, demonstrating to new and existing customers the value and reliability of Workhorse vehicles, and how that compares to earlier version of EV products that they experienced that had…

[Operator Instructions] Our first question is coming from Craig Irwin from ROTH Capital Partners.

I wanted to ask a question about the balance sheet. So at the end of the June quarter, you showed $46.5 million in inventory, can you maybe talk about how much of that is finished goods? And roughly, how many trucks does this represent? And I assume the 30 from KTS are not on there anymore, but you will have C&C trucks on the balance sheet. If you could maybe update us on where you stand there, that would be really helpful.

Sure, Craig. 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 parts that are primarily associated with the W56. And that's kind of the rough breakdown of that inventory. And of that $20 million to $24 million in trucks, probably $10 million is associated with the one particular purchase order, which I think was your question.

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

Rick, I'll start that and then turn it over to you to address the RFP. I think from our current burn rate, it -- we've got the capital in place that we need to produce. The people to produce our current orders are in place where 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 for that. And of course, 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 incremental cash spend as well. As far as the rest of the process, Rick, I'll turn that over to you or Stan.

Yes. It's a good question, Craig, in terms of -- as these potential bigger orders come in, whether it's from U.S. 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 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. When 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 will be on the bid list, it will be our job to go to earn that. That's true at other customers. We had other customers who refuse even pick up our calls because of the failure of the C1000 way back in 2021. We've amended those fences and we are in active discussions with multiple fleets on multiple size orders. And we do think that 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.

[Operator Instructions] Our next question is coming from Mike Shlisky from D.A. Davidson.

I guess I wanted to first ask about the pipeline of customers going into 2025. Given what you've signed now, I'd imagine if you haven't signed anything by August, September, there won't be much to ship in the first part on 2025. I'm just curious to see how much you've got in the pipeline, at least in the final phases of being signed to kind of get on to the road in the first part of next year?

We have two orders in house right now for about 30 trucks, which we have some of those built and then they got to go through the upfit process. There's 15 of those are for W56 208, and 15 or for the W178 right now. 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, okay. I used to be on the Board at 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 1, and then they get approval from the Board later in the year, then you know how many trucks you're going to build next year. So that's where 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 1. I know that one fleet we've tested with like our truck, so 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. And another fleet asked if we would go to a lower range vehicle, which would cost less money to help them their business case and we're working on that right now as well. So most companies use the delivery vehicles travel less than 100 miles a day. As you know, with both our W4 CC and W750 and the W56 have a range of 150. So if you want a truck with less…

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 probably plan to preserve cash. How much of a departure was is that vehicle? Was it something that you would have been very complementary what you're doing? Or is it something kind of brand new, different class, different signs? I'm just kind of curious to see.

Yes, it's a complimentary Class 5-6 product based on feedback from our customers who are not using step van, 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 W4 CC 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 work there. So we're looking at different ways how we skim that gap. But first, we have to make it through our launch and our birth, and that's based on last mile delivery use of step van or strip chassis that are built into step vans. So short-term, we need to survive and move forward. And longer term, we can get the orders in here and build trucks and then we can add that on a product in the future. Doesn't hurt us in the near-term financials, it will help us in the long-term.

We reached the end of our question-and-answer session. I'll just turn the floor back over for any further or closing comments.

I appreciate everybody calling in, Craig and Mike, I appreciate your questions. 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. Thanks a lot. Have a great day. Bye.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.