Workhorse Group (WKHS +0.00%) said that it lost $43.6 million in the second quarter on just $1.2 million in revenue. That was an improvement over its year-ago results, but that's not saying much; Workhorse's revenue didn't even break six figures a year ago.
Workhorse has struggled for years to turn its ambitious plan to make electric commercial vehicles into reality. The company delivered a grand total of 14 (that's not a typo) of its C-Series electric delivery vans in Q2, the latest in a long series of quarterly numbers that have disappointed its weary investors.
But believe it or not, those investors might -- might -- finally have something to cheer. Workhorse has a brand-new CEO, and he's already begun making big moves to try to get Workhorse on its long-awaited growth path.
Here are three surprising takeaways from Workhorse's Q2 earnings report.
Ohio-based Workhorse Group has a new CEO, and he's already revamping the company and its products. Image source: Workhorse Group.
Takeaway one: Workhorse's new CEO is a real auto CEO
Rick Dauch joined Workhorse as its new CEO in July after serving as CEO of auto-parts giant Delphi Technologies, which he successfully guided to a merger with rival BorgWarner (BWA +0.89%) last October.
Here's the thing to know: Dauch isn't some electric vehicle (EV) dreamer; he's an auto-industry veteran with experience running a business. That's already a big change for Workhorse, and he made it clear that he thinks Workhorse is a business with potential.
Dauch also made it clear that he did his due diligence before taking the job -- no small matter in light of the scandals that have rocked Nikola (NKLA +0.00%) and Lordstown Motors (RIDE +0.00%) over the last year. Dauch had this to say about his recent experience with Workhorse:
In my short time here with the Workhorse team, I have been impressed by the talent, resources, and capabilities of our collective group," Dauch said. "I joined Workhorse because of their leadership position in last mile delivery technologies, the nearly 8,000 diverse customer order backlog confirmed with standard vehicle purchase agreements that include typical terms and conditions, eight million miles of road-tested delivery trucks operating in the field and the opportunity to be a market leader in our space.
Dauch said that he has a plan to turn Workhorse from a tech start-up into a proper truck maker. And that plan starts, as he sees it, with a big overhaul of the company's still-new core product.
Takeaway two: Workhorse's van, just a year old, is getting a redesign
Workhorse's battery-electric C-Series is a so-called "last mile" van, the kind of truck that a company like UPS might use to deliver packages to their final recipients. (In fact, UPS and truck-rental giant Ryder System were both involved in the C-Series' design process and go-to-market plan.)
Workhorse began small-scale production of the C-Series last year. Production volumes so far have been tiny, but as Dauch noted, the company has real orders for nearly 8,000 of the vans.
But even though the van is just over a year old, and even though there's a solid order book, Dauch has ordered a redesign.
The problem: The C-1000 (the larger of the two C-Series models) can only carry about 6,000 pounds of cargo. That isn't enough for many potential customers, Dauch said.
The company will continue to deliver the current C-1000 in small quantities while it revises the van's design to accommodate a heavier load, but it's advising most potential customers to wait for the revamped version.
The van's electric powertrain won't change, Dauch said.
Dauch said that he and Workhorse's senior team will conduct "full vehicle design reviews" of other planned products and that the company expects to share a revamped future-product roadmap with auto investors in November.
Takeaway three: Workhorse is distancing itself from Lordstown Motors
Embattled electric pickup start-up Lordstown Motors isn't exactly a Workhorse spinoff, but it's close. Lordstown was founded by a former Workhorse CEO, Steve Burns, and the design for a pickup truck that the company plans to begin building this fall was licensed from Workhorse. In exchange for that license, Workhorse got a 10% stake in Lordstown, about 16.5 million shares, and it will receive a royalty on every truck that Lordstown sells.
That looked like a not-so-bad deal at the time, but Lordstown's once high-flying stock has slumped in the wake of allegations that Burns and others greatly exaggerated the number of preorders the company had for the pickup. (Burns and CFO Julio Rodriguez abruptly resigned in June a few days after Lordstown revised its 2020 annual report and said that it will need to raise additional cash to survive.)
But as a sign that Workhorse is moving on, the company said that it sold 72% of its Lordstown stake, or 11.9 million shares. The sales happened between July 1 and Aug. 6 at an average price of $6.67 per share, raising about $78.8 million in cash after fees.
Workhorse earnings: the raw numbers
| Metric | Q2 2021 | Q2 2020 |
|---|---|---|
| Revenue | $1.2 million | $92,000 |
| Vehicles delivered | 14 | 1 |
| Operating profit (loss), excluding non-cash charges | ($22.7 million) | ($7.0 million) |
| Net income (loss) | ($43.6 million) | ($131.3 million) |
| Cash at quarter-end | $156.6 million | $26.2 million |
Data source: Workhorse Group. Workhorse took a non-cash charge of $11.7 million in the second quarter of 2021, the result of a revaluation of its Lordstown Motors stake. It had no non-cash charges in the second quarter of 2020. Cash at quarter-end does not include the proceeds of Workhorse's sale of 11.9 million shares of Lordstown stock in July and August of 2021, expected to be about $78.8 million.
