Business plan

Workhorse Group: Cash bleeding puts business plan in limbo (NASDAQ: WKHS)

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Construction machinery, automakers and heavy-duty truck companies have taken a beating over the past year, with most rolling in the high-risk performance category. Nikola Corp (NKLA) is down 26.69%, Workhorse Group, Inc. (NASDAQ: WKHS) is at -73.02% and Lordstown Motors (RIDE) lost 74.95% while Fisker Inc. (FSR) fell by 5.41%. These stocks moved contrary to investor sentiment as industrial demand recovered from Covid19 supply shocks.


In this article, I will tell you why this stock is on hold. Workhorse leads the pack in manufacturing fully electrified minivans and minivans, which make up about half of commercial vehicles in North America. A delivery truck with a drone on top is not a bad idea for a business that intends to increase the efficiency of package delivery. However, the market did not react positively after Workhorse announced an equity deal to wipe its debt off its balance sheet. With new management in place, the company intends to reinstate its growth plans even after overhauling the manufacture of C-1000 electric vans. Still, Workhorse is revamping its product roadmap with new supply deals that will drive revenue growth in 2022. In my view, the company’s success will hinge on how strong supply chain visibility is.

In its fourth quarter 2021 earnings call, Workhorse was optimistic it would manufacture and sell 250 vehicles and generate at least $25 million in revenue in 2022. The company said production would begin in the second half of 2022 since its forecast had been postponed to the first half. half of the year. However, as of September 30, 2021, WKHS had recalled the C-1000 and the operating loss increased 26.46% to $75 million from $59.3 million in the 12 months to June 2021.

Sales, net returns, and allocations attributed to Workhorse have declined since 2020, when it peaked at $1.4 million. The year ended December 31, 2021 saw sales drop to a loss of $0.9 million. The sale of C-1000 vehicles has contributed to a greater share of revenue over the past 3 years. This came as a shock after the company announced its desire to suspend delivery of its C-1000 vehicles in the third quarter of 2021 in accordance with federal motor vehicle safety standards.

Removing the C-1000 from the road had a drastic effect on the company, especially from a revenue perspective. Net loss was $156.1 million from net profit of $280.5 million in 2021. The fourth quarter saw operating loss climb to $120.4 million from a meager $15 million. dollars in the fourth quarter of 2020.

Details have emerged that Workhorse lost a multi-billion dollar contract with the US Postal Service to upgrade its fleet of delivery vehicles. The contract was awarded to Oshkosh (OSK) which will deliver up to 165,000 US-built vehicles over the next 10 years. Workhorse is expected to make a drastic overhaul of its product roadmap. The release is planned for the W750 in the third quarter of 2022, the W56 in the third quarter of 2023 and the W34 in 2024.

Workhorse CEO Rick Dauch said the W56 represents the company’s shortest path to producing battery-powered electric vehicles and is now the No. 1 priority. Its targeted payload range is greater than 7,000 pounds. For its part, the W34 is a new generation electric vehicle and class 3/4.

WKHS announced its multi-year supply agreement with the Canadian GreenPower Motor Company (GP). The company expects that by July 2022, it will receive 1,500 EV cabs and star-frames for the new W750 Class 4 line of vans.

With the deal set to run until March 31, 2024, Workhorse revealed the project requires working capital of around $20 million. Greenpower expressed optimism about the success of the deal as it said supply was continuing with a 6 month lead time at the time of the announcement. This project is feasible since the company’s working capital at the end of 2021 was $188.6 million, including $216.2 million in current assets and $27.6 million in current liabilities.

How long will his cash levels last?

As of December 31, 2021, WKHS cash and short-term investments were $201.6 million. A look at his CapEx shows he used $132.6 million TTM. Calculations indicate that cash levels will only support the company’s operations for the next 12 months, as it uses $11.05 million per month.

In October 2020, Workhorse realized principal proceeds of $200 million in the form of a convertible senior secured note. The company plans to use these funds through the end of 2022. In its 10-K, the company said that if given the opportunity, it could raise additional capital in 2022 through an At program. -the-Market or a similar financial instrument.

Capital expenditures at its facilities in Indiana, Ohio and Michigan are expected to be between $25 million and $35 million, well above reported monthly expenditures. Any increase will mean that ATM supply will be required by November 2022.

In its annual 10-K report, Workhorse expressed doubts about the full execution of its business plan which included two new developments. In 2023 and 2024, Workhorse planned to complete two new truck chassis, namely W56 and W34 respectively. A new delivery van was also expected to be completed by the end of 2022. As it stands, only the new Class 4 delivery van could be ready. But it will take time before the company kicks in and ramps up production as needed.

The commercial vehicle market

The global commercial vehicle market is expected to grow by 3785.23 units during the forecast period 2022-2026. It is expected to grow at a CAGR of 4%. According to the North American Council for Freight Efficiency (NACFE), minivans and minivans in the United States and Canada are said to be 100% electrifiable today. The use of these vehicles would save 43.5 million tonnes of CO2 emissions annually equivalent to removing nearly 5 billion gallons of gasoline from the economy (every year).

As noted, there has been a shift in consumer behavior that has shifted towards commercial vehicles. Ford Motors (F) is ramping up production of its larger Transit Connect and Transit models. The company has announced the 2022 E-Transit, an all-electric minivan offering. It uses 40% less maintenance costs than the average 8-year/100,000-mile gas-powered 2020 Transit.

Meanwhile, General Motors (GM) unveiled its BrightDrop and EV600 in early 2021. BrightDrop’s EP1 hit the roads in the first half of 2021 while the EV600 hit the scene before 2022. FedEx (FDX) was GM’s first customer of the integrated commercial solution with fast charging functionality. A common factor between these two offerings, GM and Ford, is that they have a cargo capacity of 600 cubic feet. However, Workhorse offers a capacity of 650 to 1200 cubic feet. It has a higher capacity, indicating that the company wants to outsmart today’s competitive market with its E-series models.


Workhorse is still hemorrhaging money. It has yet to recover from the costly recall of 41 vehicles issued in 2021. The sale of 41 vans last year that failed to meet safety standards set by the National Highway Transportation and Safety Administration (NHTSA) will continue to haunt the ‘business. .

The company has not yet accepted the withdrawal of the C-1000 which was not up to heavy deliveries. Since the year ending December 31, 2020, losses jumped 334.88% from $41 million to $178.3 million in 2021.

There is a gap in the mass production of electric vehicles (from the Class 4 delivery van) that will guarantee shareholders good value for money after GreenPower supplies the new truck chassis. The discrepancy is the result of the recall which has not yet been resolved by the company.


Workhorse has developed a strategic roadmap for its electric vehicle delivery offerings. However, the two new chassis platforms (W56 and W34) scheduled for completion in 2023 and 2024 could be late for delivery if the company does not balance growth with operational expenses. After the recall of 41 C-1000 vans in 2021, there is no guarantee that the company will meet the regulatory requirements set by the Fed. Yet these new product offerings will revolutionize the market for electric vans and vans, as they offer greater cargo capacities. For these reasons, we offer a holding rating for the title.

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